Cisco Systems, Inc. : A new year to be successful

01/25/2012 | 11:08am Opinion : Bullish above 19 USD Target price : 22 USD Potential: 11.03% Stop loss: 18.2 USD

NASDAQ Communications Equipment

During fiscal year 2011, Cisco accumulated many small problems which were added to a significant decline in its gross margin. Recently, JP Morgan called Cisco’s stock as a “safe haven” for investors interested in communication equipments sector.

Last year, Cisco completed several acquisitions, essentially to extend network and services management technologies across its next-generation IP network platforms. Besides, the group had announced its collaboration with Microsoft to deliver data center virtualization solutions.
 
The upshot of all this is that Cisco is able to increase these margins and be successful in the future. Currently, Cisco is trading at a moderate level in comparison with the competitors ; its ratio “enterprise value/revenue” is estimated at 1.7x for 2012. As the chart remarked (financials heading), earning per share should rise of 17%.

Technically, Cisco’s stock was in a trading range USD 17.70/19. The bullish trend in U.S stock markets has contributed to boost share’s performance and to exit this area from the upside. At the moment,  the security could level off due to profit-taking. This could offer an opportunity for investors to buy the stock around USD 19.

In this case, the first target would be USD 20 and then USD22. Long-term investors can aim higher USD 27.60, the highest price before company’s difficulties. However, a stop loss will be fixed below 50 days moving average at USD 18.20.

Alexandre Nutte Copyright (c) 2013 4-Traders.com

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