Cisco Options Traders Bet Stock Will Rebound 7% Short Term

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Cisco Options Traders Bet Stock Will Rebound 7% Short Term

(Note: The writer of this fundamental analysis is a portfolio manager and financial writer.)

2018 has been good for Cisco Systems, Inc. (CSCO) stock, with shares rising 18%. It has now declined by as much as 10% from those highs, however, as a result of a recent sell-off that affected the whole stock market. Some options traders are now making bets that the stock will increase by 7% by the start of the next year.

Analysts’ expectations for significant profits growth for the fiscal first quarter and the whole year are one factor supporting the positive outlook. Even better, since August, they have been increasing their price and profit predictions.

CSCO data by YCharts

Bullish Bets

The number of open contracts for the January 18 expiring $47 call options has more than quadrupled in recent weeks to 27,000 contracts. To benefit from buying those calls, the stock must increase to $48.60.

A 13% Rise

Analysts predict that the stock will increase by 13% to $51.25. In fact, 69% of the 29 analysts that follow the company give it a buy or outperform recommendation, while 31% give it a hold rating.

CSCO Price Target data by YCharts

Better Growth

In the middle of November, the experts anticipate the business to release solid fiscal first quarter numbers. Revenue growth of 6% is anticipated to result in earnings growth of 18%. (For additional information, see also Cisco’s Stock Could Hit 18-Year High.)

On the basis of sales growth of 4% to $51.5 billion, earnings for the whole year 2019 are anticipated to be excellent and climb by 15% to $3.00 per share. Analysts predict that in 2020, profits growth will decrease to 9% and sales growth to 3%. However, since August, forecasts for revenues and profits for both 2019 and 2020 have increased.

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CSCO EPS Estimates for Current Fiscal Year data by YCharts

With a growth adjusted PEG ratio of 1 and a 2019 PE ratio of 15, the company is attractive at the present price. The stock will have a great incentive to rise if the firm posts outstanding results in a few weeks and gives analysts a justification to raise profit projections even higher.

The owner and manager of the actively managed, long-only Thematic Growth Portfolio atMott Capital Management LLC, a registered investment advisor, is Michael Kramer. Kramer often invests in equities and retains them for three to five years. For more on Kramer’s background and assets, go here. The information provided is only for educational reasons and is not meant to be a solicitation or an offer to buy or sell any particular securities, investments, or financial strategies. Unless otherwise noted, investments entail risk and cannot be guaranteed. Before putting any of the strategies described here into action, be sure to speak with a skilled financial advisor and/or tax expert first. The adviser will offer a list of all suggestions made in the previous year upon request. Performance in the past does not guarantee performance in the future.

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