Analyst: This Blue Chip Could Soar 20%

Wolfe Research started coverage on CSCO with an "outperform" endorsement

Deputy Editor
Dec 11, 2018 at 2:02 PM
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Shares of Cisco Systems, Inc. (NASDAQ:CSCO) are up 0.7% to trade at $47.20, after analysts at Wolfe Research initiated coverage with an "outperform" rating and a $56 price target -- representing expected upside of about 20% to Monday's close, and in territory not charted since 2000. This follows yesterday's win when CSCO -- along with this mobile app maker -- was named a "best idea for 2019" by Cowen.

The stock has climbed 23% year-to-date, with pullbacks supported by the 200-day moving average. The equity has been somewhat choppy since its Oct. 3 17-year high of $49.47, but just last week came within a point of this milestone before pulling back.

Cowen and Wolfe aren't the only analysts showing love for the tech giant. The majority of analysts following CSCO issue a "strong buy" or "buy" rating, with not a single "sell" recommendation. On the other hand, the blue chip would need to rally just 11% to hit its consensus 12-month price target of $52.32. 

Options traders, meanwhile, have grown wary of Cisco Systems lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 0.63 -- in the 76th percentile of its annual range. While this ratio indicates that long calls still outnumbered puts on an absolute basis, the annual percentile points to a healthier-than-usual appetite for bearish bets over bullish of late.

Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.04 is higher than 86% of all others from the past year. This suggests short-term options traders have rarely been more put-biased in the past 12 months.

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