Why Cisco Systems, Inc. (CSCO) Is a Solid Play Ahead of Earnings

To that end, Cisco has partnered with virtualization/cloud giant Citrix Systems, Inc. (NASDAQ:CTXS), a move that caught many investors off-guard. For that matter, it also surprised F5 Networks, Inc. (NASDAQ:FFIV) and VMware, Inc. (NYSE:VMW), rivals of both companies. But it was a brilliant move because it supports Cisco’s recent acquisitions, which included nine cloud-based companies last year. Citrix makes a solid partner because Citrix can also rely on Cisco’s enterprise dominance in hardware.

With the two companies coming together, they are able to leverage each other’s strengths. Combined, their customers can enjoy the best of both worlds, while also lowering costs.These customers will now be able to squeeze more performance out of their existing hardware since they will be running virtual operating systems on top of a data center. Plus, this relationship allows Cisco the time it needs to synergize its existing cloud deals for Meraki and Cariden.

In the meantime, it forces the hand of Juniper and F5 to look for similar deals with VMware and possibly Red Hat, Inc. (NYSE:RHT). I can’t envision a scenario where hardware will still be as relevant three to five years from now. By the same token, Citrix is now in a better position than both VMware and Red Hat because Cisco’s dominance is extra leverage that Citrix can use to help grow market share.

Expectations for the quarter
Cisco will report second-quarter results on Wednesday after the market close. The Street is looking for earnings per share to arrive flat at $0.43. Revenue is expected to arrive at $12.06 billion, or just less than 5% growth year over year.

These are relatively conservative targets and Cisco’s string of earnings beats should continue. While I’m not willing to say that Cisco is back to the tech-bubble performance days, the company is certainly not in the doghouse, either. The stock should reach $30 at some point this year, which suggests a 40% premium above current value.

This also takes into account the company’s strong cash flow projections and revenue trends, which include 22% aggregate growth in services, advancing 130 basis points year over year. Likewise, the company has a solid balance sheet, offers a respectable yield, and presents very limited downside risk.

The article Why Cisco Is a Solid Play Ahead of Earnings originally appeared on Fool.com and is written by Richard Saintvilus.

Fool contributor Richard Saintvilus has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems, F5 Networks, and VMware. The Motley Fool owns shares of F5 Networks and VMware.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!