Options Traders Blast CSCO Following Post-Earnings Dip

The security has shaved more than 15% year-to-date

Assistant Editor
May 20, 2021 at 10:47 AM
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The shares of Cisco Systems, Inc. (NASDAQ:CSCO) are down 1.8% at $51.51 this morning, despite the tech name beating top- and bottom-line estimates. Digging deeper, Cisco reported fiscal third-quarter earnings of 83 cents -- a penny above expectations -- and a revenue win. According to the company, supply chain challenges in the wake of a global chip shortage put pressure on profit margins, resulting in weaker-than-expected fiscal fourth-quarter guidance.

In response, analysts dished out five price-target hikes, as well as one cut. Most notably, Cowen and Company cut its price target to $56 from $58, while Jefferies raised it to $56 from $52. Analysts were optimistic toward Cisco stock coming into today, with nine of the 15 in coverage sporting a "buy" or better rating, while six said "hold." Plus, the 12-month consensus target price of $55.41 is a healthy 7.9% premium to the stock's current perch.

Cisco stock has had shaky run on the charts over the past 12 months, though it did hit a May 10,nearly  two-year high of $54.14. The security has also bounced off the $50 level, with support from the 80-day moving average for much of last year. The 40-day moving average, however, is looming overhead once again after briefly turning supportive. Year-to-date, CSCO is up 15.1%.

The equity could benefit from a shift in the options pits, as the security's Schaeffer's put/call open interest ratio (SOIR) of 1.12 stands higher than 84% of readings from the past year. This means short-term option players have been much more put-biased of late. 

Drilling down today's options activity, 65,000 calls and 56,000 puts have already crossed the tape, which is six times the intraday average. The most popular option is the May 51 put, followed by 52 call in the same monthly series, with news positions being opened at both. 

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