Shares in networking giants Juniper Networks and Arista Networks took a hit on Thursday following the disappointing outlook from Cisco. The tech leader reported a slowdown in new product orders and highlighted that customers were more focused on installation rather than new purchases.
Cisco estimates that there are still one to two quarters’ worth of product orders waiting to be implemented by customers. This led to a 20% decline in product orders, with enterprise orders taking a particularly hard hit with a 26% drop.
The negative sentiment spread to other players in the networking space, with Arista Networks falling 2.4% and Juniper Networks down 3.1%. However, analysts at KeyBanc believe that the impact on Cisco’s peers may not be as bad as initially feared.
KeyBanc analysts pointed out that Cisco dominates certain segments, especially Enterprise, so the read-across to Juniper and Arista may be limited. Arista also recently stated that its Enterprise unit continues to outperform the industry average in terms of growth.
Cisco’s stock suffered the most, dropping 11% in premarket trading. Oppenheimer analysts, despite maintaining an Outperform rating on the stock, advised investors to be patient and wait for the integration of Splunk, which Cisco announced a $28 billion deal to acquire in September.
While they believe there is still upside potential for value investors, they acknowledge that patience is needed. They lowered their price target for Cisco to $55 from $63.