Cisco Systems Inc (CSCO)

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Cisco Systems (CSCO) Slides Higher After Billion-Dollar Acquisition
By: Schaeffer's Investment Research | May 29, 2020

• Cisco will acquire internet monitoring solutions company ThousandEyes
• The stock is coming off a well-received earnings report

Cisco Systems, Inc (NASDAQ:CSCO) is getting a slight leg up this morning, following an announcement that the cloud specialist plans on acquiring internet monitoring solutions company ThousandEyes. Though the company did not specify the terms of this arrangement, multiple reports stated that the purchase was for $1 billion. At last glance, CSCO is up 0.3% to trade at $45.72.

CSCO has had a solid run on the charts since its well-received earnings report earlier this month. The equity is looking at a roughly 8% pop for May. Plus, it just grabbed a three-month high of $46.46 yesterday, which is also home to its late-February pre-bear gap lows. Year-to-date, however, the blue chip is still off 4.9%.

The options pits are quite optimistic, per CSCO's 10-day call/put volume ratio of 3.59 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the 84th percentile of its 12-month range. This suggests that long calls have rarely been more popular in the past year.

That said, speculating on CSCO's next move with options could be a prudent play. The stock's Schaeffer's Volatility Index (SVI) of 27% stands higher than just 14% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment.

Most members of the brokerage bunch also share this optimism. Thirteen analysts covering CSCO call it a "buy" or better, while the remaining seven say "hold." The consensus 12-month price target of $48.24, on the other hand, is a slim 5.6% premium to current levels.

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