CISCO – The Backbone of the Internet

CISCO, Daily

Cisco Systems Inc. (Cisco) has long been THE player in the USA for global network equipment hardware sales like routers, switches and gateways. In recent years it has also,  like many hardware companies, moved into software applications and security.

The technology giant, often referred to as the backbone of the internet, reports its quarterly earnings later today after the close of the New York trading session. The shares have been in high demand following the December low at $40.35 closing yesterday at $47.89, just below the key 52-week high of $49.47. The rally from December 26 represents a gain of some 18.68%, which outperforms the USA500’s gain of 16% over the same period.

Last quarter CISCO revenues jumped  8% to reach $13.1 billion, ahead of all estimates. More specifically, the application business surged 18% and security climbed 11%. It also saw its adjusted earnings per share jump 23% to also beat estimates.

Today Cisco are calling for its second quarter 2019 revenues to climb between 5% and 7% and its earnings per share (EPS) to come in at the $0.71 to $0.73 a share range.  Market expectations have cooled recently, with a change in outlook from Morgan Stanley issued just yesterday that changed their recommendation from “overweight”  to “equal-weight”  and lowered their price target to $49.00 from $51.00 a share. Nomura too also downgraded the company to a “Neutral from a “Buy” in December. However, Pipar Jaffray reiterated their “Overweight” rating in October with a price target in the $50.00-$53.00 range and remain the most bullish of all analysts covering Cisco.

Technically, the Fibonacci extension suggests the stock could rise to the $53.00 level should the 2018 $49.00 level be breached and broken.  Key support sits at S1 and the 61.8 Fibonacci level at $46.75, the 20 day-moving average and S2 at $46.00 and finally the 200-day moving average at $44.40.