Cisco earnigns: Love, hate or apathy?

Cisco didn’t disco last night. The company reported earnings that were a little bit “better than expected”, but the guidance for next quarter was a little bit “worse than expected”.  The stock is down 8% in the early morning action and that’s not too surprising given how far it had run in the last few months. Recall that I’d sold most of my Cisco calls down as I’d noted recently in when I’d written:

“I’m stepping back and am indeed raising a little cash today by selling about a 1/3 of my Cisco calls which were out of the money when I bought them and are now in the money. I’ve got more than a double on these as the stock has passed $20 since we were buying these when the stock was closer to $15. I’ve steadily trimmed these Cisco calls down since I (luckily?) loaded up on them near the stock’s lows and the only Cisco calls I have remaining are my longest-dated ones, which expire out in January 2013.”

Better to be lucky than good, or whatever, but the way that this Cisco turned out has been a great example of why we buy the crashes and sell the big rallies.

What to do with Cisco now? Despite the slightly “worse than expected” guidance, I don’t think there’s much reason to panic about Cisco here. Indeed, with the stock now back near $17 a share, it’s trading at just 7x next year’s earnings when you account for the $48 billion in the checking account at the company. That’s pretty darn cheap for a company that’s fueling the backbone of the entire Internet and wireless networking world.

As usual, I don’t suggest rushing into Cisco here, but I do think it’s pretty good place to start tranche-ing into some Cisco long again. I’m not going to pull the trigger on buying back any of the Cisco I’ve sold much higher yet, as I’ll probably let the stock settle for a few days before pulling the trigger. Let you know if and when I buy back some Cisco.

Markets are gently higher despite the Cisco guidance. You can’t find a headline on the WSJ or Marketwatch homepages about Cisco’s disappointing earnings this morning at all.

There’s an old saying that first comes love, then comes hate, then comes apathy. Is Cisco loved or hated right now? I’d say neither and the lack of headlines also indicates apathy towards Cisco. And apathy can be a great contrarian indicator. Something to think about.