Option Trade 
Cisco Systems, Inc. (NASDAQ:CSCO) Calls 
Monday, November 09, 2015

**OPTION TRADE: Buy the CSCO Feb 2016 30.000 call (CSCO160219C00030000) at approximately $0.65. Place a pre-determined sell at $1.30.

Note: No protective stop losses added -- but if you wish to do so make it $0.25.

by Ian Harvey

November 09, 2015

Cisco Systems, Inc. (NASDAQ: CSCO), a network and communication provider, is scheduled to post earnings of $0.57 per share for its fiscal first quarter, on Thursday 12th, after the market closes. That would be up from $0.54 per share in the year-ago period. Revenue for the three months that ended in October is expected to be about $12.70 billion.

The network equipment maker is expected to benefit from a recovery in sales of its switches and routers. Cisco's security business has also been growing steadily. Cisco is also working on a joint venture with Chinese server maker Inspur to offset the impact of weakness in its U.S. business.

The latest development where the media is dubbing it the "Networks of the Future," Ericsson (NASDAQ:ERIC) and Cisco (NASDAQ:CSCO) have agreed to create a partnership expected to be a key driver of growth and value for the next decade and generate revenues of $1B for each company by 2018.

According to a press release, the multi-faceted relationship will offer customers the best of both companies: routing, data center, networking, cloud, mobility, management and control, and global services capabilities.

Cisco Systems, Inc. has dropped 1.39% during the past week, however, the bigger picture is still very bullish; the shares have posted positive gains of 1.93% in the last 4 weeks.

The 52-week high of the share price is $30.31 and the company has a market cap of $143,994 million. The 52-week low of the share price is at $23.03.

Cisco Systems should head towards $32.00 per share according to 22 Analysts in consensus, with a high price estimate target of $36.00.

The company has been rated an average of 1.85 by 26 Wall Street Analysts. 16 analysts have added the shares in their list of strong buys. 2 stock experts have also rated a buy. 6 broker firms have advised hold. 2 market experts have rated it as strong sell.

Many analysts have commented on the company rating. Barclays initiates coverage on Cisco Systems. The analysts at the brokerage house have a current rating of Overweight on the shares. In recent information released to the investors, Barclays announced the price target of $32 per share. The rating by the firm was issued on October 14, 2015.

Also recently, analysts at Deutsche Bank have reiterated a Buy rating for Cisco Systems, along with a price objective of $35, ahead of its first quarter FY16 earnings scheduled on November 12.

According to the research firm, Cisco System will manage to generate revenues and adjusted earnings per share (EPS) of $12.64 billion and 57 cents. Analysts at Deutsche Bank expect Cisco Systems to likely benefit from better than expected spending at US Telcos and Cablecos at Northern and Western Europe. Additionally, Deutsche Bank noted continuing order bookings strength in datacenter switching and quarter-over-quarter (QoQ) improvements in security revenues.

Furthermore, Deutsche Bank expects a contribution of over 150bps of incremental growth in FY15, driving FY17 and FY18 revenue growth in the 5% year-over-year range, along with margin accretion. Cisco Systems has managed to report better-than-expected results for its previous quarter, reporting EPS of $0.59, that came ahead of its consensus estimates $0.563. Additionally, revenues came in at $12.8 billion, beating consensus of $12.6 billion.

Harvey’s Options Volatility Indicator


Cisco Systems has net cash of $33 billion on their balance sheet. In total, the company has $11.80 per share in cash. This gives them plenty of flexibility to repurchase shares, issue dividends or special dividends, and make acquisitions. Obviously, a portion of the cash is subject to taxation from repatriation. However, this is a significant cash amount even after you take into consideration the tax effect.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the CSCO Feb 2016 30.000 call (CSCO160219C00030000) at approximately $0.65. Place a pre-determined sell at $1.30.

Note: No protective stop losses added -- but if you wish to do so make it $0.25.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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