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Cisco Systems, Inc. (CSCO) Stock’s Financials Are Good, But Technicals Are Better

Cisco stock has been a quiet but exciting revelation, and it's only going higher

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After getting burned throughout most of last decade, Cisco Systems, Inc. (NASDAQ:CSCO) is taking a cautious approach to their guidance for the new year. In the second quarter of fiscal year 2017, Cisco anticipates a drop in sales due to headwinds generated by a global competitive environment. CEO Chuck Robbins referenced uncertainties in the world economy, as well as potential regulations under the incoming Donald Trump administration.

Although you can’t go wrong erring on the side of caution, Cisco might be hedging their bets unnecessarily. There are a number of technology sectors in which the networking giant can leverage its power, key among them being the Internet of Things. This is a market that’s projected to hit $1.7 trillion by the year 2020.

Furthermore, the company has a division called “IoT Systems and Software.” You can’t get any more direct than that for CSCO stock!

Understandably, with a lucrative market comes intense competition. The IoT business is unique in that it brings out an eclectic bunch. NVIDIA Corporation (NASDAQ:NVDA),, Inc. (NASDAQ:AMZN), and General Electric Company (NYSE:GE) are all competing in one form or another. Of course, you can’t ignore industry titans like Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT).

Although that seems like a tough matchup for CSCO stock, I wouldn’t short-change it.

Arguably, Cisco is in the best position to advantage IoT, as it has the brains and the architecture. By default, the company can provide the physical connectivity through its vast networks. Also, Cisco can offer security mechanisms and standardization measures for IoT device makers.

Strong technical tailwinds for CSCO stock

All of these are wonderful reasons to consider buying up CSCO stock. However, what I like best is its technical momentum. Frankly, a fundamental story is only that — a story. The difference is whether or not investors are willing to risk money on it.

Most indicators suggest that Cisco stock is poised for greater things in the coming years.

Let’s start with the low-hanging fruit. Year-to-date, Cisco shares are up over 12%. Based on recent trends, the actual return shouldn’t be too far off from that figure. Yes, the price action has been a little choppy since the beginning of September. Nevertheless, CSCO stock is trading above its 50- and 200-day moving averages.

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