For his "Executive Decision" segment of Mad Money Wednesday night, Jim Cramer spoke with Chuck Robbins, chairman and CEO, and Kelly Kramer, CFO, of Cisco Systems Inc. (CSCO) , a stock that's up for the year and rallying Thursday after the release of its latest quarterly numbers.
Robbins said that Cisco's business continues to grow and is a solid mix of both hardware and services revenue. He said they are now the largest cyber security provider to the enterprise segment, and that segment is growing 21% a year. Most of that revenue is subscription-based. Robbins noted that only 3% of Cisco's business stems from China. But as soon as increased tariffs were announced, it only took his team 48 hours to assess the changes and make the necessary adjustments to mitigate them. All current tariffs are built into their guidance, he added. Cisco is also benefiting from decreased DRAM prices which are now a tailwind for its hardware products.
Cisco seems to be executing completely on everything, but is all this good news already discounted? Let's see what the charts look like today.
We looked at CSCO last week and came away with a bearish viewpoint. Does the early trading Thursday negate that?
In the daily bar chart of Action Alerts PLUS holding CSCO, below, we can see that so far Thursday the share price of CSCO gapped above the cresting 50-day moving average line. The volume of trading looks like it has been increasing from the early part of April but the daily On-Balance-Volume (OBV) line has only recently ticked higher.
The Moving Average Convergence Divergence (MACD) oscillator crossed below the zero line earlier this month for an outright sell signal but recently the two averages that make up this indicator have begun to narrow. We could see a cover shorts buy signal if the rally lasts.
In this weekly bar chart of CSCO, below, we have yet to see improvement in the indicators. The weekly OBV line is pointed down and the MACD oscillator is very close to a bearish crossover.
In this Point and Figure chart of CSCO, below, we see the rally Thursday (a column of "X's") without the price gap. The software behind the charting package is still indicating a downside price target around $46. A rally to $57.49 may be needed to turn this chart bullish.
Bottom-line strategy: CSCO is up strongly Thursday but so far it has not significantly altered the indicators. The jury is still out in my opinion.