Why Cisco Stock Is Becoming Attractive Following the Coronavirus Sell-Off
The market isn't sparing Cisco Systems (NASDAQ: CSCO) from the brutal sell-off triggered by the coronavirus pandemic. Granted, a recession would have a negative effect on the company's short-term performance. But the tech giant should also profit from the stay-at-home policies that are being enforced in several countries. And with long-term tailwinds that should still materialize, Cisco has become an attractive investment opportunity for patient investors.
Cisco's core business consists of selling network devices and software. During the last quarter, the company's infrastructure platform segment, which mostly includes computer networking solutions, represented 54.4% of the total revenue. That segment is exposed to the expected worldwide computing infrastructure reduced spending. Because of the uncertainties related to the coronavirus outbreak, the research company IDC communicated a pessimistic scenario where IT spending is forecasted to increase by only 1% in 2020, compared to 4% previously.
But Cisco also proposes communication solutions such as Webex and Jabber for remote workers to communicate and collaborate from anywhere. These solutions represent an important part of the company's applications segment that reached 11.2% of the total revenue during the last quarter. In the context of the work-from-home policies that are enforced because of the coronavirus outbreak, Cisco has seen a 22-fold traffic increase in its Webex cloud backbone over the last few weeks. A part of this growth is due to the expansion of free Webex offerings to support the quick implementation of work-from-home policies, though. But this development is likely to benefit Cisco over the long term since it gives enterprises the opportunity to become familiar with these types of solutions.
Source Fool.com
