Cisco Systems: Cybersecurity and its Enticing Prospects

Cisco Systems, Inc. (NASDAQ:CSCO) is showing decent momentum that provides encouragement to make new CSCO option trades. Cisco Systems with its market capitalization of $149.21 designs, manufactures, and sells Internet protocol (IP)-based networking products and services related to the communications and information technology (IT) industry.  The Company also provides services associated with these products and their use and provides products and services for transporting data, voice, and video traffic across intranets, extranets, and the Internet.

Previous Coverage

Three months ago, I did a series of articles titled “Cybersecurity stocks on the move”, and I talked about Cisco Systems in one of those articles. In that post, I discussed the huge possibilities that Cisco has in providing investors with impressive growth and income prospects. I talked about how the stock is seriously undervalued and I recommended that you take bullish positions on the trade. I especially recommended that you purchase the CSCO May 2015 27.000 call (CSCO150515C00027000at an asking price of $1.29.

When I wrote that February 9 article, the shares of Cisco were trading around $27 per share and I effectively gave the stock a $28.30 price target with the call options that I recommended. The shares of Cisco Systems closed with 0.41% gains at $29.35 yesterday to mark an 8.7% share price appreciation in three months. As at market close yesterday, the options contract that I recommended had an asking price of $2.44 to mark an 89.15% growth in three months.

Cisco Systems in the News

The main reason behind the recent interest in CSCO options is that Cisco reported its fiscal third quarter (Q3 2015) results yesterday. The third quarter results that the company posted yesterday shows a company that is constantly revolutionizing itself in order to stay relevant and competitive in today’s fast-paced world. Highlights of the third quarter results are presented below:

Cisco reported third quarter GAAP earnings of $0.48 per share in line with the consensus estimate of $0.48 per share. The non-GAAP EPS of $0.54 beat the consensus by $0.01. The reported earnings also mark a decent 4.35% growth over earnings of $0.46 from the same quarter last year. It might interest you to know that Cisco has consistently met/beat the consensus estimate in the last 20 quarters.

The company reported third-quarter revenue of $12.14B to beat the consensus estimate of $12.06B in revenue. The revenue comes above the top guidance of $12.12B. The third quarter revenue beat marks a 5% year-over-year improvement in revenue and its marks the fifth consecutive revenue beat of the company.

In addition, Cisco reported gross margin of 62.5% above the guidance range of 61% to 62%.

How to Trade CSCO Options

CSCO Chart

The chart above shows how the shares of Cisco have traded within the last one year. The stock originally had a $24 support and $25 resistance before it broke down to its 52-week low of $22.49. The stock has started a rally from that 52-week low to breakout above a $28 resistance, and it now has another resistance at $29.5 after rounding out a bottom last month.

Interestingly, Cisco is in an uptrend as its 50-day moving average of $28.30 is higher than its 100-day moving average of $28.24, which is in turn higher than its 200-day moving average of $26.74. I recommend CSCO call options and you might want to consider the CSCO Aug 2015 30.000 call (CSCO150821C00030000) at an asking price of $1.02.

— Daily Option Alerts

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