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 Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

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!