Cisco Tumbles on Sales View Cut: ETFs in Focus

Tech prime Cisco Systems CSCO disappointed investors following third-quarter fiscal 2022 results. Though the networking giant beat on earnings, it missed on revenues and lowered its revenue guidance for the ongoing quarter on concerns about China’s COVID shutdown that accelerated supply-chain problems.

Cisco shares tumbled 14% on weak guidance, marking the worst one-day drop since February 2011. The dismal trading put ETFs with the largest allocation to this networking giant in focus. Investors should closely monitor the movement of these funds — iShares U.S. Telecommunications ETF IYZ, iShares North American Tech-Multimedia Networking ETF IGN, First Trust Nasdaq Cybersecurity ETF CIBR and First Trust Dow Jones Internet Index Fund FDN — and grab the opportunity whenever it arises.

Cisco Earnings in Focus

Earnings of 87 cents per share outpaced the Zacks Consensus Estimate by a penny and improved 5% from the year-ago earnings. Revenues were flat year over year at $12.83 billion and fell shy of the consensus mark of $13.32 billion (see: all the Technology ETFs here).

Cisco expects revenues to decline 1-5.5% for fourth-quarter fiscal 2022 compared to the previous growth projection of 5.9%, while earnings are expected to be 76-84 cents per share versus 92 cents. The networking gear maker warns that Chinese lockdowns and other supply disruptions would hurt sales growth in the ongoing quarter. For the fiscal year, revenues are expected to grow 2-3% year over year, while earnings per share are projected to rise in the range of $3.29-$3.37.

ETFs in Details

iShares U.S. Telecommunications ETF (IYZ)

iShares U.S. Telecommunications ETF offers exposure to U.S. companies that provide telephone and Internet products, services and technologies. It follows the Russell 1000 Telecommunications RIC 22.5/45 Capped Index, holding 21 stocks in its basket. Cisco takes the third position at 13.6% of assets  (read: 5 Top Tech Areas That Deserve Your Attention Now).

iShares U.S. Telecommunications ETF has AUM of $383.6 million and trades in an average daily volume of 805,000 shares. IYZ charges 42 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares North American Tech-Multimedia Networking ETF (IGN)

iShares North American Tech-Multimedia Networking ETF provides exposure to telecom equipment, data networking and wireless equipment companies by tracking the S&P North American Technology-Multimedia Networking Index. iShares North American Tech-Multimedia Networking ETF holds 22 securities in its basket, with Cisco taking the fifth spot with a 7.3% allocation.

iShares North American Tech-Multimedia Networking ETF has accumulated $109.9 million in its asset base and sees a moderate volume of around 43,000 shares a day. IGN charges 43 bps in annual fees and carries a Zacks ETF Rank #2 (Buy) with a High risk outlook.

First Trust Nasdaq Cybersecurity ETF (CIBR)

First Trust Nasdaq Cybersecurity ETF follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cyber security segment of the technology and industrials sectors. The index includes companies primarily involved in the building, implementation and management of security protocols applied to private and public networks, computers, and mobile devices in order to provide protection of the integrity of data and network operations. First Trust holds Nasdaq Cybersecurity ETF holds 41 stocks in its basket, with Cisco taking the top spot at 5.6% (read: Why You Should Buy Cybersecurity Stocks & ETFs Now).  

First Trust Nasdaq Cybersecurity ETF has accumulated $5.2 billion in its asset base. CIBR charges 60 bps in annual fees and trades in an average daily volume of about 1.2 million shares.

First Trust Dow Jones Internet Index Fund (FDN)

First Trust Dow Jones Internet Index Fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 42 stocks in its basket, with Cisco occupying the fifth spot at 4.8%.

First Trust Dow Jones Internet Index Fund is the most popular and liquid ETFs in the broad technology space, with AUM of $4.5 billion and an average daily volume of around 387,000 shares. FDN charges 51 bps in fees per year and has a Zacks ETF Rank #3 (Hold).

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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
 
First Trust Dow Jones Internet ETF (FDN): ETF Research Reports
 
First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports
 
iShares U.S. Telecommunications ETF (IYZ): ETF Research Reports
 
iShares North American TechMultimedia Networking ETF (IGN): ETF Research Reports
 
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