One of the more remarkable changes to have occurred since the coronavirus deeply impacted the U.S. is our change in perspective. What once consumed our lives no longer seem important. On a micro scale, this also applies to Cisco Systems (NASDAQ:CSCO). For years, CSCO earned a reputation as a stable but boring investment. Now, Cisco stock is among the most compelling ideas in the markets.
To be fair, the company has always been an indispensable component of our telecommunication and IT networks. Prior to this whole mess, many speculated on Cisco stock as a beneficiary of the 5G rollout.
In particular, CSCO’s expertise in enterprise-level Internet of Things (IoT) platforms provides brilliant, next-generation solutions for an era the company terms “Industry 4.0.”
Granted, the crisis has worsened to the point where James Bullard, president and CEO of the Federal Reserve Bank of St. Louis, warned that unemployment could hit 30% during the second quarter. If such a scenario plays out, this would represent the worst such figure since we kept records on unemployment numbers.
However, it’s encouraging to see that despite the nasty partisan politics that continue in Washington, both Republicans and Democrats agree in principle to help the American people. This is a huge boon for Cisco stock.
Last week, California made huge waves when it announced a mandatory stay-at-home order. Now several other states are following in its footsteps, most significantly, New York, New Jersey and Massachusetts, all of which feature robust economic engines that have now essentially shut down.
Obviously, that’s not great for the broader economy. Nevertheless, a surge in work-from-home (WFH) demand naturally boosts CSCO’s profile.
Cisco Stock and the Opportunity to Shine
I’m sure some of you have read the cutesy message circulating on social media suggesting the Chinese character for “crisis” can mean both “danger” and “opportunity.” If you care at all about linguistic accuracy, I’d encourage you to research the veracity of this claim. After all, it’s not like you have anywhere else to be.
Foreign language myth-busting aside, for Cisco stock, this stretched interpretation is quite appropriate. Yes, so called “WFH stocks” have garnered significant interest in the last few days. However, where CSCO has an advantage is in its infrastructural resilience.
With everyone working from home, it’s putting an incredible strain on wireless and internet communication platforms. Interestingly, CNN Business reported that Netflix (NASDAQ:NFLX) and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube deliberately reduced their streaming quality in Europe to prevent the internet from breaking.
Obviously, such an impact is a big concern back home as well. Yet with Cisco’s massive capacity, they have an opportunity to market their platform supremacy. Honestly, what better marketing would you have then demonstrating that your equipment will work irrespective of rain, shine or coronavirus?
Another factor that could potentially bolster Cisco stock is the underlying company’s comprehensive IT umbrella. Remember that working from home isn’t all fun and games. Sadly, it’s an opportunity for those with ulterior motives and nefarious agendas to take advantage.
With so much data moving away from the enterprise to the home, that’s a goldmine for cybercrooks. When you’re working at a major organization, you can rely upon enterprise-level firewalls and other defense mechanisms. At home, this concept introduces worrying and unexpected variables.
Fortunately, Cisco has a very robust cybersecurity business, offering synergies that organically make their platforms extremely attractive. It’s just one more way for management to boost the brand.
Synergy Is the Distinguisher
In the modern business world, we’ve seen societies emphasize agility and specialization. However, in a time of tremendous crisis, demand may shift back toward all-in-one solutions.
Perhaps in any other circumstance, Cisco stock may not have ranked highly in your portfolio. But now, companies that can offer not only advanced, myriad solutions, but deliver them consistently and reliably are critical. Under these parameters, CSCO has the opportunity to shine.
Let’s be very clear here: the U.S. is about to face unprecedented economic turmoil. Already, unemployment claims on a week-over-week basis have climbed to levels not seen since the Great Recession.
For Cisco’s clients, this means that whatever revenue they can generate reliably and safely would be critical for survival. This is where CSCO can leapfrog the competition in terms of architecture resilience and protecting communication and commerce channels from cyberattack.
I don’t always think that danger equates to opportunity. But when I do, I’m thinking about Cisco stock.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.