Cisco Systems (CSCO) — As the world’s largest supplier of high-performance internetworking systems with a dominant share of the overall Ethernet switching market, Cisco has a competitive advantage over its peers. S&P states that its financial profile is one of the best in the industry, with $48.2 billion in cash and investments as of October.
Last week, the stock was one of the top three performers of the Dow Jones Industrial Average with a 4.4% gain, demonstrating what appears to be institutional interest in the stock despite being hammered earlier in the month after its CEO lowered its five-year revenue growth target to 3%-6%, down from 5%-7%.
But the company also announced enhancements to both on-premise and cloud-based (DaaS) implementers, which is part of the continued investment in desktop virtualization solutions. Cisco saw a 5.5% increase in fiscal 2013 earnings, ended in July, to $1.86, and S&P projects EPS of $2 in fiscal 2014 and $2.13 in fiscal 2015. The company pays an annualized dividend of $0.68 (3.2% yield).
Technically, CSCO is a bottom-fishing candidate with the possibility of having established a double-bottom. It must punch through resistance at $21.50 to complete the base, and if it does, it is likely to close the gap from $21.44 to $24. CSCO is also a solid long-term investment for quality participation in cloud systems.