Cisco Systems, Inc. (NASDAQ:CSCO) hasn’t been among the favorite tech stock for many investors. What might be the reasons behind the underperformance of this stock? Cisco Systems, Inc. (NASDAQ:CSCO) stock hasn’t been doing well for many years, and after missing expectations for quite some time, the company had exceeded the streets expectations in its last report, which turned out to be a positive sign for the stock. Is this stock all set to make a move up again in 2015? Option Action Traders Dan Nathan, Carter Worth and Michael Khouw talked on CNBC about Cisco Systems, Inc. (NASDAQ:CSCO) stock.
Nathan feels that over the last 10 years, Cisco Systems, Inc. (NASDAQ:CSCO) stock has been in a very tight range. He mentioned that few other mega tech names are currently trading at market multiple of 15-16 times next year’s earnings, but Cisco Systems, Inc. (NASDAQ:CSCO) is trading at 13 times multiple. He feels that something is not resonating in the organization. He pointed that the last 10 years stock price trend of Cisco Systems, Inc. (NASDAQ:CSCO) looks like a coiled spring.
“If there is ever a reason for investors to get back in here and buy this stock, I think you could have this thing up at $40 in a heartbeat. So here is the thing. I don’t know what John Chambers is doing or not doing. I know the quarter they reported was perceived to be better than expected. But it seems to me that somebody else needs to tell the story, somebody else needs to do a new restructuring and get this thing going. If that happens, at some point in 2015, this thing could be a moonshot,” Nathan said.
Carter Worth also thinks that this stock has the potential to grow bigger as it has the right setup. Though this stock had many years of underperformance, the latest earnings report suggested that the performance has improved a lot. Khouw pointed that Cisco Systems, Inc. (NASDAQ:CSCO) hasn’t been a topline growth story in 2014. But, he feels that this stock has some real potential, and it has nearly $30 billion in net cash. He thinks that this stock is cheap and in addition to that it has ammunition if they want to get aggressive, like giving back the money to shareholders.
Khouw said that this stock is trading at 25% of the peak price, which was back during the tech bubble in 1999. He added that Cisco Systems, Inc. (NASDAQ:CSCO) is generating 2.5 times more revenue that in 1999. He mentioned that the company which was once ludicrously expensive is actually ludicrously cheap now.
Nathan feels that even if there is no leadership change in Cisco Systems, Inc. (NASDAQ:CSCO), it might still be able to grow big in 2015. He pointed out that analysts are expecting only 3% sales and earnings growth in 2015, but he feels that if the company manages to bump that up, it could cause a rerating of the stock just like in Oracle Corporation (NYSE:ORCL) stock. He also added that options might work to get profits from Cisco Systems, Inc. (NASDAQ:CSCO) stock.
Disclosure: None
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