Dow Stock Drubbed By Weak Guidance

Cisco Systems cited a challenging macro environment in the short term

by Patrick Martin

Published on Nov 14, 2019 at 10:06 AM
Updated on Jun 24, 2020 at 10:16 AM

At the bottom of the Dow this morning sits Cisco Systems, Inc. (NASDAQ:CSCO), down 6.2% to trade at $45.44. While the software name's adjusted first-quarter earnings per share of 84 cents on $13.16 billion in revenue topped forecasts, Cisco issued a weaker-than-expected current quarter guidance. The report also cautioned of a slowdown in technology spending amid global economic uncertainties. 

A whopping 13 analysts have stepped forward with price-target cuts this morning, the lowest coming from Credit Suisse to $46 from $49. However, RBC still called CSCO the "best-positioned networking name," and Raymond James noted that software and recurring revenue continues to improve despite near-term pressure.

Cisco stock is now trading at its lowest point since late January. The shares have shed 22% since their July 16 19-year high of $58.26, and the most recent rally this month was rejected by their 80-day moving average. Now, CSCO is holding just above its year-to-date breakeven level. 

The mood in the options pits heavily favors puts lately. Data at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows Cisco stock's 10-day put/call volume ratio of 0.71, which ranks in the 82nd percentile of its annual range. While the ratio indicates calls outnumber puts on an absolute basis, the lofty ranking shows the unusual preference for puts.

Today is indicating more of the same. In just the first half hour of trading, 34,000 puts have changed hands, 13 times the average intraday amount and volume pacing for the 100th percentile of its annual range. Leading the charge today is the November 45 put, where 5,678 contracts have traded. 

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