US stocks still in the red for three days in a row as investors continued to worry about the economic outlook, especially after the jobless claims data showed no improvements in recent week. Cisco’s results, despite good, had its sales forecast fell below expectations, adding gloomy outlook on tech shares.
US jobless claims rose 2,000 during the week ended August 7, bringing the total claims to 484,000, way beyond the consensus of 469,000. It was the highest in nearly the last six months. The results reminded that the state of US labor market remains fragile and this does not bode well for spending which relies on employment.
At Apple, pressures from Japanese government pushed the company to replace older models of iPod Nano which are having battery problems. Elsewhere, Bernstein suggested that Apple’s cash balance of $46 billion is excessive. One solution suggested is distribution of dividend to increase potential ownership of Apple’s shares which are rated Outperform with target at $325.
The Cisco Story
Although it delivered a 79% rise in profit, Cisco plunged nearly 10% to end the Thursday session at $21.36. Net profit for 4Q was $1.9 billion or 33 cents a share compared to the net profit in prior year of $1.1 billion or 19 cents per share. Revenue was up 27% from $8.5 billion to $10.8 billion. Cisco’s results were below consensus net profit of $10.88 billion or 42 cents per share. For the current quarter, revenue is expected to grow 18%-20% (yoy) or $10.62 billion to $10.82 billion, also below consensus of $10.96 billion.
CEO John Chambers said that despite the reported quarter was very strong, global economy showed mixed signals. This implied that based on the market and the customers’ expectations the company is facing a possible global economy slowdown as the current situation is showing uncertainties.
As a result, analysts did some adjustments on Cisco’s rating:
Upgrades and downgrades
On the positive side, Motorola surged 4.16%, eBay up 1.6%, while Pfizer rose 1.25%.
At the end of the day, Dow Jones index fell 58.88 points or 0.57% to close at 10,319.95, S&P 500 index shed 0.5% to end at 1,083.61 while Nasdaq Composite slipped 0.8% to 2,190.27.
US jobless claims rose 2,000 during the week ended August 7, bringing the total claims to 484,000, way beyond the consensus of 469,000. It was the highest in nearly the last six months. The results reminded that the state of US labor market remains fragile and this does not bode well for spending which relies on employment.
At Apple, pressures from Japanese government pushed the company to replace older models of iPod Nano which are having battery problems. Elsewhere, Bernstein suggested that Apple’s cash balance of $46 billion is excessive. One solution suggested is distribution of dividend to increase potential ownership of Apple’s shares which are rated Outperform with target at $325.
The Cisco Story
Although it delivered a 79% rise in profit, Cisco plunged nearly 10% to end the Thursday session at $21.36. Net profit for 4Q was $1.9 billion or 33 cents a share compared to the net profit in prior year of $1.1 billion or 19 cents per share. Revenue was up 27% from $8.5 billion to $10.8 billion. Cisco’s results were below consensus net profit of $10.88 billion or 42 cents per share. For the current quarter, revenue is expected to grow 18%-20% (yoy) or $10.62 billion to $10.82 billion, also below consensus of $10.96 billion.
CEO John Chambers said that despite the reported quarter was very strong, global economy showed mixed signals. This implied that based on the market and the customers’ expectations the company is facing a possible global economy slowdown as the current situation is showing uncertainties.
As a result, analysts did some adjustments on Cisco’s rating:
- Cisco downgraded by Oppenheimer from Outperform to Perform as Q1 sales outlook soft;
- BMO Capital downgraded Cisco to Market Perform from Outperform;
- Deutsche Bank maintained Buy rating on Cisco but with lowered target at $28 from $32;
- Kaufman Bros. considered Cisco’s guidance as “conservative”;
- RBC Capital lowered Cisco’s target to $28 from $33;
- Citigroup saw weakness in Cisco as a buying opportunity;
- Wunderlich kept Buy rating on Cisco but with lowered target from $33 to $28, saying that the stock is ‘inexpensive enough to be compelling’;
- At Wedbush, Cisco target lowered to $27 from $29 but kept at Outperform;
- Barclays downgraded Cisco to Equal Weight from Overweight;
Upgrades and downgrades
- Wells Fargo initiated/continued a handful of ratings on tech stocks. At Market Perform are Microsoft, Dell, Hewlett-Packard, and Yahoo!; at Outperform are IBM, Google, and Apple.
- In addition, Microsoft is also expected to Outperform by FBR Capital while Bernstein saw Apple at Outperform with target set at $325.
- BMO Capital downgraded semiconductor sector and in effect, put both Intel and Texas Instruments at Market Perform, down from Outperform.
- eBay upgraded from Hold to Buy at Citigroup;
On the positive side, Motorola surged 4.16%, eBay up 1.6%, while Pfizer rose 1.25%.
At the end of the day, Dow Jones index fell 58.88 points or 0.57% to close at 10,319.95, S&P 500 index shed 0.5% to end at 1,083.61 while Nasdaq Composite slipped 0.8% to 2,190.27.
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