5 Best Communication Equipment Stocks to Buy Now

Cisco has become a household name globally due to its routers, switches and networking equipment. The company is rapidly diversifying its business by moving into workplace software, such as video chat and VPNs. The stock rallied in November after the company posted softer-than-expected declines. Cisco’s CFO Kelly Kramer said that the company continued to increase its focus on software services and saw a 10% year-over-year growth in subscription revenue.  Services revenue jumped 1.9% in the period to reach $3.34 billion, while Security segment was up 6%.

A total of 59 hedge funds in our database reported owning Cisco shares as of the end of the third quarter. Ken Fisher’s Fisher Asset Management leads these funds with 20,969,760 shares, worth $825.99 million. Here is what Heartland Advisors said about CSCO in its 2020 Q3 investor letter:

Cisco, the world’s leading computer networking provider, was down for the period after revenues from its Products and Applications business lines weakened as IT departments postponed network spending in response to COVID-19. Sales from its security line were up roughly 14% but strength in the segment wasn’t large enough to offset weakness elsewhere. Impressively, they held operating margin on a 9% revenue decline.

Wall Street’s reaction to the weak results were mixed. Some credited the company for executing well in the face of an unprecedented macro pressure on its clients, while others cited results as an indicator that Cisco is struggling in its transformation from a predominantly hardware-oriented business to one that generates recurring-revenue through software and services.

The challenges faced by Cisco strike us as a temporary setback to what has been ongoing progress in its transition to a model that generates recurring revenue and is less tied to the IT spending cycle.

We believe the positive strides made in previous quarters will resume. With the recent setback, shares are trading at an attractive 12x earnings, while generating a nearly 4% dividend yield and a free cash flow/enterprise yield of nearly 10%.”