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Cisco’s Q3 Earnings: Positive Surprise for Investors!

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Cisco (NASDAQ:CSCO) stock gained around 2% in after-hours trading on Wednesday following its third-quarter results. The company reported better-than-expected results in the third quarter of fiscal 2020, which ended in April, despite coronavirus fears. The hardware company also provided a better-than-expected earnings outlook for the fourth quarter.

In the third-quarter press release, Cisco CEO Chuck Robbins said, “The pandemic has driven organizations across the globe to digitize their operations and support remote workforces at a faster speed and greater scale than ever before. We remain focused on providing the technology and solutions our customers need to accelerate their digital organizations.”

Cisco’s Q3 earnings results

In the third quarter, Cisco reported an adjusted EPS of $0.79 compared to $0.78 in the third quarter of fiscal 2019. The earnings beat analysts’ consensus estimate of $0.69 per share. Cisco generated revenue of $11.98 billion—a reduction of 7.5% from the third quarter of fiscal 2019. The company beat analysts’ consensus revenue expectation of $11.70 billion. Cisco’s Infrastructure Platform sales fell 15% YoY (year-over-year) to $6.4 billion. The revenues from Applications fell 5%, while Security sales rose 6%.

Cisco also estimated a revenue reduction of 8.5%–11.5% year-over-year in the fourth quarter of fiscal 2020 with a non-GAAP EPS of $0.72–$0.74. Analysts estimated a non-GAAP EPS of $0.71 in the fourth quarter, which drove Cisco stock higher.

Overall, analysts expect -5.6% and 1.2% growth in the company’s fiscal 2020 and 2021 sales, respectively. Analysts also expect an adjusted EPS of $3.11 and $3.14 in fiscal 2020 and 2021, respectively.

What are analysts saying about Cisco stock?

Currently, 28 Wall Street analysts cover Cisco stock. Among the analysts, 14 recommend a “buy,” and 14 recommend a “hold.” None of the analysts recommend a “sell.” Analysts’ mean target price on the stock is $47.10, which implies a 12.3% gain from the current level of $41.95. The consensus target price for the stock has risen from $46.68 in April—a rise of about 1%.

Many analysts changed their target price for Cisco stock after its third-quarter financial results.

  • Jefferies increased its target price from $45 to $49.
  • Credit Suisse increased its target price from $40 to $41.
  • Piper Sandler increased its target price from $42 to $44.

Stock returns

Cisco stock fell 2.9% on Wednesday and ended the day at $41.95. At this closing price, the company’s market cap is $177.9 billion. The stock is trading 28.0% below its 52-week high of $58.26 and 29.5% above its 52-week low of $32.40.

Based on Cisco’s closing price on Wednesday, the stock was trading 0.4% below its 20-day moving average of $42.10. The company is trading 4.6% above its 50-day moving average of $40.12 and 3.6% below its 100-day moving average of $43.52. The stock’s 14-day relative strength index score of 51 indicates that the stock isn’t overbought or oversold.

Cisco’s lower, middle, and upper Bollinger Bands are $40.45, $42.10, and $43.75, respectively. The stock closed near its middle Bollinger Band level, which suggests that it isn’t overbought or oversold.

Cisco stock rose 2.6% in pre-market today at 5:51 AM ET. The S&P 500 futures fell 0.03%, while the Dow futures fell 0.1%. To learn more, read Goldman Sachs Warns about a US Stock Market Crash.

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