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CSCO: Is now the time?

A few weeks ago the talk around the tech world was CSCO.  How bad was the call, how bad were the numbers, how painful will the squeeze be from the public, and when the hell is it going to stop going down?  Two days ago we finally saw some life after an upgrade out of Oppenheimer, the upgrade was short lived as CSCO has pulled back to the levels prior to the upgrade, but, CSCO is still holding above 19.  Our initial downside target was $17.50 – $18.00 if it was to react similar to the last disappointment in Q3, but CSCO is holding above $19 and the risk to reward is starting to swing in the favor of the bulls.

The problem with the CSCO report was Chambers was very negative and the market was looking for good news if the market wasn’t expecting gold CSCO wouldn’t have gotten beaten down as much as it did.  The question is whether or not it is save to start dipping the toes in the water at these levels?

At 19.35 CSCO is trading at 12 times forward earnings discounting cash of 4.02 CSCO trades at 9.5 times forward estimates which is cheap historically.  I know the prospects look dim in the coming quarters with Chambers comments regarding the forward progress in the public sector.  The stock has taken an absolute beating and any positive news will be taken very well while negative news will be expected with roughly two dollars of downside risk and an up side target of $23.50 – $26.50, I think know is a good time to start building into a position and taking 25% of your max position size at today’s levels.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.