Why Cisco Systems Slumped This Morning

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Cisco Systems  (NASDAQ: CSCO  ) slipped 1% this morning after JPMorgan Chase downgraded the networking gear gorilla from neutral to underweight.

So what: Along with the downgrade, analyst Rod Hall lowered his price target to $17, representing about 23% worth of downside to Friday's close. While contrarians might be attracted Cisco's decline over the past six months, Hall believes there's more room to fall given the emerging market headwinds -- slowing demand, depreciating currencies, and declining GDP estimates -- continuing to work against the company.

Now what: According to JPMorgan, Cisco's risk/reward trade-off is particularly unattractive at this point. "Carrier revenue trends in major emerging markets look likely to weaken further in 2014," noted Hall. "We believe that these negative revenue trends combined with weak local currencies are likely to drive lower capital spending." With the stock now off more than 15% from its 52-week highs and trading at a 3%-plus dividend yield, however, those short-term concerns might provide patient Fools with a juicy long-term income opportunity.

A more compelling pick for 2014?
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2810681, ~/Articles/ArticleHandler.aspx, 10/23/2014 4:22:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement