Cisco stocks take a hit as uncertainly looms over trade wars and economy

Cisco shares took a pounding on Thursday after the tech giant admitted to “broad-based weakness” in the face of US-China trade and Brexit uncertainty.

“We indicated that we had begun to see some weakness and that weakness continued throughout Q1 and was more broad-based,” Cisco’s CEO Chuck Robbins said on a conference call with financial analysts.

“While the main challenges continue to be service provider in emerging markets, this quarter we also saw relative weakness in enterprise and commercial.”

However, despite these headwinds, he remained optimistic.

Cisco — which has a massive presence in the Triangle — remained “well positioned” to capitalize on opportunities across cloud, automation, 5G, security and collaboration, he said.

“Our transition to software continues to progress and we are on track with where we said we would be at the end of fiscal year 2020. This transition to software not only aligns to how our customers want to consume our technology, but we also believe it will lessen the impact of macroeconomic shifts in the future.”

Despite the current uncertainty, he added, Cisco’s innovation pipeline remains strong.

“At our annual partner summit last week, we announced several exciting additions to our portfolio, including network automation and analytics, cloud based networking, collaboration, as well as new security capabilities. Over the next couple of months, you will see us deliver even more innovation to help our customers achieve their business objectives.”

However, not everyone is so convinced.

Barclays analyst Tim Long has an equal-weight rating, and cut his price target to $47 from $51.

On the Marketwatch, he said he was “concerned last quarter with the comment on weakening Enterprise orders in July.”

“That weakness persisted through the October quarter and spread to the normally resilient Commercial market,” Long said, while maintaining the equivalent of a hold rating. “We believe this adds a lot of risk,” he was quoted as saying.

Jefferies analyst George Notter, who has a buy rating and reduced his price target to $52 from $54, however, is a little more hopeful.

“We expect they’ll preserve EPS power as margins expand and cost cuts get implemented. Below-market valuations and the dividend yield should also help protect downside in the stock,” Notter was quoted as dsaying. “Further, business transformation/digitization trend that’s driving the business isn’t going away – even in a softer economic environment.”

As of 3.21 pm on Thursday, Cisco stocks were trading at $44.78 per share, down 3.68%.