5 ETFs To Gain On Cisco's 4-Year Growth Outlook

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On its first Analyst Day since 2017, the networking giant Cisco Systems (CSCO Quick Quote 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 the 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.

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 Quick Quote 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.

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