An uncertain trade environment is prompting businesses to cut back on spending, and it's going to hit Cisco's bottom line, according to Goldman Sachs. The firm downgraded the stock to a neutral rating on Thursday, based on expectations that "large enterprise spending will continue to weaken and telecom spending activity will remain depressed in the near future." The firm cuts its full year 2020 earnings estimate by 0.3%, and lowered its 12-month price target on the stock to $48 from a prior target of $56. The new target is 2.5% higher than where the stock is currently trading. "In the telecom segment, we are concerned that negative trends could persist well into 2020, driven by carrier pauses ahead of 5G and needed carrier network automation implementation," Goldman Sachs analyst Rod Hall wrote in a note to clients. The Cisco downgrade is part of Goldman's larger call on the enterprise hardware space. The firm believes that trade tensions are creating an uncertain business environment, but that spending should eventually pick back up once there's more clarity on geopolitical relations. "Ongoing weakness in large enterprise spending is largely a function of business confidence given uncertainty around the trade situation and should therefore correct when business leaders gain confidence in a trade resolution," Hall wrote. In addition to downgrading Cisco, Goldman downgraded HP Inc . and NetApp to sell, while Pure Storage was lifted to a buy. Cisco shares fell 1.9% on Thursday. - CNBC's Michael Bloom contributed reporting.
An uncertain trade environment is prompting businesses to cut back on spending, and it's going to hit Cisco's bottom line, according to Goldman Sachs.