May 16, 2011 | In: Technology

Will CSCO Ever Recover?

I have traded CSCO late last year, I remember I bought it right after the big drop back in November, and I sold it in January for a small profit. It wasn’t the best trade, and I wanted to hold the stock more, but of course, the stock collapsed yet another time in February.

CSCO 6 months trend

You can see from the chart above the very bearish movement of the stock. To see what big traders think about CSCO, let’s examine its short ratio:

Shares short: 48,500,000 down around 7 million from the previous month (March 2011)
Total shares: 5,530,000,000
Short Ratio: 0.6
Short Percentage of float: 0.9

You can clearly see that the short ratio is healthy, but the problem with Cisco is that they keep reporting results and forecasts below analysts expectations. But, on the other hand, the stock is trading at an attractive P/E of 13.04, and it’s currently only double the price of its book value. Again, CSCO is a stock that is making money, CSCO products are in high and increasing demand. Wait till the economy really picks up and you’ll see where this stock will be. Cisco is not a bugs bunny company, and nor its a bank, and definitely this bearish trend will be broken sooner or later.

On the other hand, I do think that there’s a potential that the stock will drop considerably further though, by considerably, I mean to the $10 level, and at this price, it’ll be extremely attractive even for a short term investment.

One last thing, CSCO’s current MACD is very bullish. Let’s see!

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