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On its first Analyst Day since 2017, the networking giant Cisco Systems (CSCO - Free Report) provided an upbeat outlook for revenues but somewhat disappointed investors in terms of profit projections.
The company expects annual revenues to grow 5-7% through July 2025 with a midpoint being $62.9 billion. More than half of revenues came from the continued expansions in software and subscription business. Subscription revenues are expected to rise from 44% notched for its fiscal 2021 ended July 31 to 50% by fiscal 2025.
Cisco also projects earnings per share excluding certain items to grow at about 4-7% per year, setting a mid-point target of $4.07 per share in 2025. Analysts were looking for greater efficiency to boost the company’s profits at a faster rate than sales. High chip prices in its hardware business will weigh on its overall profits.
Currently, the remote-working trend is driving demand for the company's video-conferencing platform Webex, virtual private network AnyConnect and cybersecurity products. On its fourth-quarter fiscal 2021 earnings conference call last month, the network equipment maker expected revenues to increase 7.5-9.5% year over year, and earnings per share in the range of 79-81 cents for first-quarter fiscal 2022. It warns that supply-chain issues will continue to increase component costs and delivery backlogs in the ongoing quarter (read: Cisco's Earnings Beat, Guidance Disappoints: ETFs in Focus).
The stock currently has a Zacks Rank #3 (Hold) and a Momentum Score of A.
ETFs to Watch
Investors could bet on robust expected growth of this network equipment maker through the ETFs with the largest allocation to its stock. Below, we highlighted five such funds:
This fund follows the Dow Jones U.S. Select Telecommunications Index and offers exposure to 44 U.S. companies that provide telephone and Internet products, services and technologies. Cisco occupies the top position with 24.1% of the assets. The ETF has an AUM of $444.5 million and trades in an average daily volume of 156,000 shares. It charges 42 bps as annual fees and currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
iShares North American Tech-Multimedia Networking ETF
This ETF provides exposure to telecom equipment, data networking and wireless equipment companies by tracking the S&P North American Technology-Multimedia Networking Index. Holding 22 securities in its basket, Cisco takes the third spot with 9.2% allocation. The product accumulated $114 million in its asset base and is seeing a moderate volume of around 7,000 shares a day. It charges 43 bps of annual fees and presently carries a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: 5 Tech ETFs Outperforming the Market This Year).
This ETF follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cyber security segment of the technology and industrials sectors. It amassed $4.9 billion in its asset base. The fund charges 60 bps in annual fees and trades in an average daily volume of about 676,000 shares. In total, the product holds 39 stocks in its basket with Cisco taking the fifth spot at 5.8% (read: Why You Should Buy Cybersecurity ETFs).
This actively managed ETF debuted in July this year and attracted $16.9 million in its asset base. It offers exposure to quality companies with capital discipline and lower market volatility. Holding 31 stocks in its basket, Cisco is its top firm making up for 5.1% of its assets. The fund charges 89 bps, annually, and trades in an average daily volume of 19,000.
Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)
This ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 29 stocks in its basket with Cisco occupying the fifth position accounting for 5.3% allocation. DJD is able to manage assets worth $167.1 million while trading in a volume of 20,000 shares a day, on average. It charges 7 bps of annual fees and has a Zacks ETF Rank #3.
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5 ETFs to Gain on Cisco's 4-Year Growth Outlook
On its first Analyst Day since 2017, the networking giant Cisco Systems (CSCO - Free Report) provided an upbeat outlook for revenues but somewhat disappointed investors in terms of profit projections.
The company expects annual revenues to grow 5-7% through July 2025 with a midpoint being $62.9 billion. More than half of revenues came from the continued expansions in software and subscription business. Subscription revenues are expected to rise from 44% notched for its fiscal 2021 ended July 31 to 50% by fiscal 2025.
Cisco also projects earnings per share excluding certain items to grow at about 4-7% per year, setting a mid-point target of $4.07 per share in 2025. Analysts were looking for greater efficiency to boost the company’s profits at a faster rate than sales. High chip prices in its hardware business will weigh on its overall profits.
Currently, the remote-working trend is driving demand for the company's video-conferencing platform Webex, virtual private network AnyConnect and cybersecurity products. On its fourth-quarter fiscal 2021 earnings conference call last month, the network equipment maker expected revenues to increase 7.5-9.5% year over year, and earnings per share in the range of 79-81 cents for first-quarter fiscal 2022. It warns that supply-chain issues will continue to increase component costs and delivery backlogs in the ongoing quarter (read: Cisco's Earnings Beat, Guidance Disappoints: ETFs in Focus).
The stock currently has a Zacks Rank #3 (Hold) and a Momentum Score of A.
ETFs to Watch
Investors could bet on robust expected growth of this network equipment maker through the ETFs with the largest allocation to its stock. Below, we highlighted five such funds:
iShares U.S. Telecommunications ETF (IYZ - Free Report)
This fund follows the Dow Jones U.S. Select Telecommunications Index and offers exposure to 44 U.S. companies that provide telephone and Internet products, services and technologies. Cisco occupies the top position with 24.1% of the assets. The ETF has an AUM of $444.5 million and trades in an average daily volume of 156,000 shares. It charges 42 bps as annual fees and currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
iShares North American Tech-Multimedia Networking ETF
This ETF provides exposure to telecom equipment, data networking and wireless equipment companies by tracking the S&P North American Technology-Multimedia Networking Index. Holding 22 securities in its basket, Cisco takes the third spot with 9.2% allocation. The product accumulated $114 million in its asset base and is seeing a moderate volume of around 7,000 shares a day. It charges 43 bps of annual fees and presently carries a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: 5 Tech ETFs Outperforming the Market This Year).
First Trust Nasdaq Cybersecurity ETF (CIBR - Free Report)
This ETF follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cyber security segment of the technology and industrials sectors. It amassed $4.9 billion in its asset base. The fund charges 60 bps in annual fees and trades in an average daily volume of about 676,000 shares. In total, the product holds 39 stocks in its basket with Cisco taking the fifth spot at 5.8% (read: Why You Should Buy Cybersecurity ETFs).
Formidable Fortress ETF (KONG - Free Report)
This actively managed ETF debuted in July this year and attracted $16.9 million in its asset base. It offers exposure to quality companies with capital discipline and lower market volatility. Holding 31 stocks in its basket, Cisco is its top firm making up for 5.1% of its assets. The fund charges 89 bps, annually, and trades in an average daily volume of 19,000.
Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)
This ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 29 stocks in its basket with Cisco occupying the fifth position accounting for 5.3% allocation. DJD is able to manage assets worth $167.1 million while trading in a volume of 20,000 shares a day, on average. It charges 7 bps of annual fees and has a Zacks ETF Rank #3.