Cisco shares are struggling at $46 resistance

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Jan 19, 2021
  • Fund managers have a buy rating on Cisco
  • Cisco has agreed to pay $115 for each share of Acacia
  • Cisco might benefit under a Biden administration, and it could generate more profitability

Cisco (NASDAQ: CSCO) shares are advancing this January, but the price cannot stabilize above the $46 resistance level. Cisco has agreed to pay $115 for each Acacia share, and the company has added John D. Harris II to its board.

Fundamental analysis: Cisco has agreed to pay $115 for each share of Acacia

Cisco is a healthy and stable technology company that can still offer strong potential returns for long-term investors. Some analysts even say that in this ongoing bull market, Cisco has substantial upside potential.

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According to the latest news, Cisco has agreed to pay $115 for each Acacia share, which is much above its original $70/share deal. The acquisition deal won conditional approval from China’s antitrust authority, and Cisco expects to complete the acquisition by the end of the first calendar quarter of 2021.

Cisco reported Q1 results in November; total revenue has decreased  9.3% Y/Y to $11.93B while Q1 GAAP EPS was $0.51 (beats by $0.01). The company’s management has reported that the decline in sales and earnings for 2020 is due to a coronavirus pandemic.

Cisco declared a $0.36/share quarterly dividend and announced that it expects the second-quarter revenue of around $12B. The company has raised its dividend for ten years, and the stock’s 3.17% dividend payout remains highly attractive.

Cisco is the type of company that might benefit under a Biden administration as the new stimulus program could lead to a substantial increase in government orders. Cisco has recently added John D. Harris II to its board, who worked as CEO of Raytheon International.

“John is known for his strong leadership and results-oriented approach. His depth of experience operating a global business at scale and commitment to excellence will positively impact Cisco’s strategy and enhance our trusted relationships with customers as they increase their digital agility,” said CEO Chuck Robbins.

Morgan Stanley has raised its view on the networking equipment sector and said that Cisco shares are still undervalued relative to the market. It is essential to mention that RBC Capital Markets and Credit Suisse also positively view this company.

Cisco is fairly valued at the current stock price, the company has good fundamentals, and it could generate more profitability as a result of having a more software-oriented management team.

Technical analysis: The first resistance level stands at $46

Data source: tradingview.com

The critical support levels are also $42 and $40; $46, $48, and $50 represent the resistance levels. If the price jumps above $46, it would be a signal to trade Cisco shares, and the next target could be around $48, but if the price falls below the $40 support level, it would be a firm “sell” signal.

Summary

Cisco is a healthy and stable company that can still offer strong potential returns for long-term investors. Cisco might benefit under a Biden administration, and it could generate more profitability as a result of having a more software-oriented management team.

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