CSCO is Getting Interesting Again: I took a position in CSCO last fall around 16 and rode it to just under 21 for about 30% return over 6 months. I’m starting a new bullish position with the following thoughts. Feedback appreciated.
With the current price at 16.33; “low” analyst target of 14; “high” analyst target of 27; and “median” analyst target of 21.38, the risk reward ratio IMO is starting to look good on CSCO. The number of analysts covering CSCO is around 36, representing a broad spectrum of opinions/research.
CSCO’s trailing versus forward PE split is about 4 points (using rounded off current PE of 12 and forward PE of 8) and implies a possible upside of 50% or more, to the $24ish range. This correlates with the majority of the analyst projections.
Technically, CSCO’s chart is showing a lot of support around 15, but there remains an open Gap at 14 from last August. Nothing says gaps have to get filled, but I’ve seen that be the norm more than not the last few years.
CSCO’s RSI is the lowest it’s been since last June and I’m looking for a repeat of the run we saw kick off last August.
Knowing that I rarely pick the exact bottom on stocks, I see CSCO’s bottom somewhere between 14 and 16. If the market turns bullish (I think likely) then the bottom may in fact be 16. If the market continues its downward trend (IMO less likely, but possible), then the odds of CSCO filling the gap at 14 go up.
Disclosure: I took an initial position with $15 Jan14 leaps at 3.25 (20 contracts) and intend to buy more leaps if CSCO dips to 15 and or 14. My goal is for CSCO to hit 21+ (21.38 is analyst median price target) before Jan14 which will yield a 100%+ return. GLTA Longs!
