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The company was set to lose more than $20 billion in market value, based on its premarket share price of $47.48, after it lowered its projections for profit and revenue for fiscal year 2024 on Wednesday.
Cisco blamed the weakness on a slowdown in orders in the first quarter, saying “customers are currently focused on installing and implementing products in their environments”.
The company, looking to diversify its business from one-time purchases of expensive equipment to more recurring software offerings such as cybersecurity packages, started fulfilling its backlog of orders this year after grappling with supply-chain issues.
“Now, they’ve exhausted their excess backlog and the business is stepping back down to lower revenue run rates,” Jefferies analyst George Notter said in a note.
“Like so many other companies, the organization is dealing with excess customer inventory – a by-product of the supply chain crunch over the past 2+ years,” Notter said.
At least six brokerages trimmed their target prices for the stock, pushing the median view down to $54. That is nearly 70 cents higher than the last closing price of the stock.
Cisco trades at more than 13 times its 12-month forward earnings estimates, compared with the industry median of 10.98.
With the backlog buildup and demand being weaker than previously believed, “we now see fiscal 2024 as more of a correction year”, Morningstar analyst William Kerwin said.
