Is Cisco Systems Still On The Right Route?

On Nov. 13, Cisco Systems (NASDAQ: CSCO) reported its fiscal first-quarter earnings for 2020. While the quarter itself was slightly ahead of already lowered consensus estimates, guidance for the second quarter disappointed.

Cisco has been transitioning its business model to more of a software as a service (SaaS) mix. And over the past few quarters, this strategy appeared to be gaining traction. Revenues have grown for the past eight quarters and the stock price climbed from the mid-$30s to a high of $58 per share in mid-July. But now Cisco has disappointed for two straight quarters. So let's take a closer look at Cisco's recent quarter and see if the 23% swoon in the stock price over the past few months presents long-term investors with a buying opportunity.

Cisco, for the second straight quarter, identified a "challenging" macro environment. Revenues grew 2%, operating margins expanded 130 basis points, and net income grew 5%. Earnings per share increased 12% as Cisco bought back a massive amount of stock over the past year (more than $20 billion or over 7% of its shares outstanding). Despite the revenue growth, orders in the quarter fell 4%, indicating trouble ahead.

Source Fool.com