Post-Earnings selloff on Cisco Systems presenting buying opportunity
Tech giant Cisco Systems (Nasdaq: CSCO) reported earnings after the closing bell back on August 14. The company beat EPS estimates and revenue estimates, but it issued soft guidance. The company cited the ongoing trade war as the reason for the softer guidance and investors weren’t happy about that. The stock dropped 8.6% on August 15.
Looking at the weekly chart for Cisco we see a couple of important factors are coming in to play. First, the stock dropped below its 52-week moving average and this is only the second time in the last two years the stock has been below the 52-week. It was below the moving average for a brief period at the end of December and beginning of January, but the stock rallied from there.
The second factor that jumps out from the chart is the location of the weekly stochastic readings. The indicators are in oversold territory and they are at their lowest level for the last three and a half years. More importantly, the indicators just made a bullish crossover and that could be a good sign for the stock. Looking at the other bullish crossovers from the past few years, each one appears to have been a good time to buy.
Looking at the 10-week RSI we see that it was at its lowest level for the last three and a half years as well. This indicator has also turned higher and that could mean that the stock is shifting from a downward trend to an upward trend.
The Tickeron Technical Analysis Overview looks at the daily indicators and several of them are pointing toward a bullish move as well.
The daily stochastic indicator suggests the ticker price trend may be in a reversal from a downward trend to an upward trend. In 28 of 47 cases where Cisco's stochastic indicator exited the oversold zone it resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued uptrend are 60%.
The RSI Indicator points to a transition from a downtrend to an uptrend -- in cases where Cisco's RSI indicator exited the oversold zone, 7 of 12 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued uptrend are 58%.
The lower Bollinger Band was broken -- a price increase is expected as the ticker heads toward the middle band, which indicates a buy or call consideration for traders. In 21 of 37 cases where Cisco's price broke its lower Bollinger Band, its price rose further in the following month. The odds of a continued uptrend are 57%.
From a fundamental perspective, Cisco has performed well over the last few years. Earnings have grown at a steady pace of 9% annually over the last three years. Earnings increased by 19% in the most recent quarterly report.
The company’s management efficiency measurements are really strong with a return on equity of 35.9% and a profit margin of 32.6%. The Tickeron SMR rating for this company is 19, indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents.
In addition to the strong SMR rating, the Tickeron Valuation Rating of 7 indicates that the company is seriously undervalued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization.
The sentiment toward Cisco has been changing over the last few months. There are 27 analysts following the stock at this time and 17 have the stock rated as a “buy” while 10 rate the company as a “hold”. Two months ago there were 20”buy” ratings and seven “hold” ratings.
The short interest ratio dropped to 1.42 recently, but both the number of shares sold short and the average daily trading volume changed drastically. The number of shares sold short fell from 43.1 million to 37.9 million and that had a negative impact on the ratio. However, the average daily trading volume jumped from 12.9 million to 26.8 million and that may have had an even greater impact on the drop in the short interest ratio.
Momentum Indicator for CSCO turns positive, indicating new upward trend
CSCO saw its Momentum Indicator move above the 0 level on November 22, 2024. This is an indication that the stock could be shifting in to a new upward move. Traders may want to consider buying the stock or buying call options. Tickeron's A.I.dvisor looked at 82 similar instances where the indicator turned positive. In of the 82 cases, the stock moved higher in the following days. The odds of a move higher are at .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Moving Average Convergence Divergence (MACD) for CSCO just turned positive on November 27, 2024. Looking at past instances where CSCO's MACD turned positive, the stock continued to rise in of 50 cases over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where CSCO advanced for three days, in of 329 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 310 cases where CSCO Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The 10-day RSI Indicator for CSCO moved out of overbought territory on November 27, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 44 similar instances where the indicator moved out of overbought territory. In of the 44 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Stochastic Oscillator has been in the overbought zone for 2 days. Expect a price pull-back in the near future.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where CSCO declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
CSCO broke above its upper Bollinger Band on November 06, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (4.378) is normal, around the industry mean (8.223). P/E Ratio (15.201) is within average values for comparable stocks, (91.676). Projected Growth (PEG Ratio) (3.538) is also within normal values, averaging (1.815). Dividend Yield (0.031) settles around the average of (0.042) among similar stocks. P/S Ratio (3.571) is also within normal values, averaging (26.255).
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. CSCO’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 82, placing this stock slightly better than average.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
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General Information
a manufacturer of Internet Protocol based networking products and services related to the communications and information technology industry
Industry TelecommunicationsEquipment