Jim Cramer Says Cisco’s 8.4% Post-Earnings Drop Is a Buying Opportunity
Jim Cramer said Thursday that Cisco’s sharp post-earnings decline was not a negative development but instead created an excellent buying opportunity. He said investors should not sell reflexively because of conservative guidance, particularly when management has a history of setting low expectations and then outperforming them. Cisco shares initially rose in after-hours trading Wednesday after the company reported strong quarterly results. The stock then quickly reversed as investors focused on the company’s guidance. Cisco closed down 8.4% in regular trading Thursday. Cramer said the decline sent the wrong signal and obscured the underlying strength of Cisco’s business. He noted that the quarter showed strong demand from hyperscale cloud providers, while the company’s traditional networking business also performed well. In his view, the real issue was the guidance, not the quarterly results themselves. Cramer was particularly positive about Cisco’s potential as an artificial-intelligence investment. He said the company could benefit substantially from the AI wave through its networking business inside data centers and between data centers. “The decline in the stock gives you an excellent buying opportunity,” Cramer said. “I think Cisco absolutely deserves to be bought as an AI networking stock.” Cramer also said Cisco CEO Chuck Robbins has consistently tended to provide relatively conservative expectations at the start of a new fiscal year. He described that “low start, strong finish” approach as a common trait among many excellent CEOs. “Most excellent CEOs simply don’t want to overpromise,” Cramer said. “They would rather give weaker guidance and then exceed it.” As a result, he said, when a company reports strong numbers but its stock falls because of its guidance, that can be a time to add to the position. “Many times, a company delivers extremely good numbers, but the stock still goes down,” Cramer said. “And the reality may be that you should buy more.”
Cisco shares initially rose in after-hours trading Wednesday after the company reported strong quarterly results. The stock then quickly reversed as investors focused on the company’s guidance. Cisco closed down 8.4% in regular trading Thursday.
Cramer said the decline sent the wrong signal and obscured the underlying strength of Cisco’s business. He noted that the quarter showed strong demand from hyperscale cloud providers, while the company’s traditional networking business also performed well. In his view, the real issue was the guidance, not the quarterly results themselves.
Cramer was particularly positive about Cisco’s potential as an artificial-intelligence investment. He said the company could benefit substantially from the AI wave through its networking business inside data centers and between data centers. “The decline in the stock gives you an excellent buying opportunity,” Cramer said. “I think Cisco absolutely deserves to be bought as an AI networking stock.”
Cramer also said Cisco CEO Chuck Robbins has consistently tended to provide relatively conservative expectations at the start of a new fiscal year. He described that “low start, strong finish” approach as a common trait among many excellent CEOs.
“Most excellent CEOs simply don’t want to overpromise,” Cramer said. “They would rather give weaker guidance and then exceed it.” As a result, he said, when a company reports strong numbers but its stock falls because of its guidance, that can be a time to add to the position.
“Many times, a company delivers extremely good numbers, but the stock still goes down,” Cramer said. “And the reality may be that you should buy more.”