At time of writing, global coronavirus cases are nearing the one million mark, with the U.S. leading the number of cases by a country mile. Given this dubious honor, it’s no surprise that the markets have taken down even stable companies like Cisco Systems (NASDAQ:CSCO). However, because of its long-term potential, many are taking advantage of the discount in Cisco stock.
In my opinion, it’s not an unreasonable bet. Fundamentally, CSCO features a solid balance sheet. Additionally, its three-year revenue growth rate is above average for its industry, while featuring very strong profitability margins. Better yet, Cisco stock entitles you to a generous dividend, which can help mitigate downside while giving you passive income for your troubles.
Nevertheless, investors should be careful about the evolving and harsh realities that come from a health crisis transitioning to an economic one.
In shocking news, during a one-week period, more than three million Americans filed for unemployment benefits. For the latest reported week, economists estimate that, at minimum, we could see 3.5 million workers join their ranks. However, according to USA Today, other sources have much higher forecasts:
…Nomura forecasts 4.1 million; Morgan Stanley, 4.5 million; and Bank of America, 5.5 million. Such first-time jobless claims represent the best measure of layoffs across the country.
The numbers could mark just the initial wave of a punishing couple of months.
“We could see unprecedented job loss in the April jobs report in the tens of millions, with the unemployment rate (now a 50-year low of 3.5%) reaching double digits,” Bank of America said in a research note.
No matter what, Cisco stock will encounter at least some turbulence ahead.
Organic Marketing for Cisco Stock
Despite the obvious headwinds – and many understated ones – CSCO shares have grown increasingly compelling to contrarians. I don’t think it’s just the discounted price that’s driving interest. Rather, the underlying company has ample marketing opportunities. Moreover, management is taking advantage of them.
Primarily, the pandemic is a chance for Cisco to market its broad cybersecurity services portfolio. As you know, cybercriminals have come out in full force during this crisis. Prominently, many crooks have set up fake websites to “sell” N95 face masks. Or in another bizarre example, conspiracy theorist Alex Jones peddled fake coronavirus cures before getting shut down.
Of course, the main problem is that cybercriminals are advantaging the emotionally heightened state of our country to dupe people out of their valuable assets. In this digital world, it’s not always cash that’s most desirable. Instead, unauthorized access to privileged information is often well worth its weight in gold.
Frankly, what better way to gain that access than to manipulate someone’s emotions?
Adding to this problem, millions of workers find themselves operating remotely. While great for national health, it’s unfortunately creating a data goldmine for cybercriminals. To counter this problem, Cisco is offering for a limited time its cybersecurity services free of charge, particularly for platforms involving remote workers.
In the early stage, this initiative probably won’t benefit Cisco stock. After all, the underlying company is giving something away for free. But in the long run, it’s a perfect marketing opportunity to demonstrate the necessity of strong, reliable network defense mechanisms.
Invariably, cybercriminals will wreak havoc on companies with lesser, shall we say Cisco-less platforms. Thus, this is an easy juxtaposition to sell corporate clients, eventually boosting the profile of Cisco stock.
Advantaging a Virtual Normal
In an interview with CNBC, Cisco CEO Chuck Robbins brought up interesting statistics regarding the jump in remote conferencing. Robbins stated:
In the first 11 business days of March, we’ve had 5.5 billion meeting minutes…Yesterday we held 3.2 million meetings globally on Webex, and that doesn’t include one on ones. Those are multi-individual meetings.
Naturally, over the last several weeks, interest in so-called work-from-home stocks – Slack Technologies (NYSE:WORK), Zoom Video Communications (NASDAQ:ZM) and Dynatrace (NYSE:DT) – have soared. Currently, we’re in the low-hanging fruit phase of sector demand; that is, just existing is winning.
But as we move forward, corporate clients will judge work-from-home platforms on several criteria, including reliability, usability, and safety. Here, CSCO has a great opportunity to market itself as a comprehensive solution for all communication needs.
Granted, it’s not a perfect bet because we’re hardly in a perfect environment. That said, if you’re going to buy some discounted shares, Cisco stock offers a very solid look.
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.