Let’s talk Cisco…

Let’s talk Cisco.  Cisco hasn’t caught a bid since it reported its second straight disappointing quarterly results a couple months ago.  The stock has gotten much cheaper, as it has fallen much faster than estimates have.

Back before that most recent report, back in May, analysts expected Cisco would make $1.76 next year.  Now after all these weeks of handwringing about how Cisco’s business is supposedly deteriorating or that it’s somehow suddenly going to lose its market dominance in making the Internet and the Cloud and the apps that run on them run, how much do they expect Cisco’s going to earn next year?  $1.73.  Yup, estimates have gone down some 1.5% since that report.

Meanwhile, the stock has dropped 15% since that report.  With $5 per share in net cash, that means the stock is now trading at less than six times next year’s earnings.  I’ve been getting more aggressive in adding to my own personal Cisco position in recent weeks using call options dated six to twelve months out and with strike prices between $15 and $17.50.   This position has been painful of late, but I do expect we’ve got some coming upside and if that upside does come, it’ll be sooner rather than later.