If you’re interested in value investing in the technology niche, 2020 is a challenging year. Sure, there was a market correction during the onset of the novel coronavirus. Yet, today many tech firms’ stocks are overpriced. Cisco (NASDAQ:CSCO) might be an exception to the rule, though, as Cisco stock appears to be reasonably valued.
That’s surprising as Cisco stock was among the tech names that skyrocketed and then crashed during the dot-com boom and bust of the early 2000’s.
But that was then, and this is now. In the year 2020, Cisco stock is trading at a depressed price and this presents an opportunity for value seekers.
Plus, Cisco is making strides in the video conferencing market, which is red-hot this year. And unlike Zoom Video Communications (NASDAQ:ZM) stock, Cisco stock hasn’t zoomed to a severely overbought price level this year.
A Closer Look at Cisco Stock
So, let’s get into the nitty-gritty of Cisco stock. On Oct. 23, the share price closed at $38.82. That’s closer to the 52-week low of $32.40 than the 52-week high of $50.28.
Additionally, Cisco stock features a trailing 12-month price-to-earnings ratio of 14.7. Among technology stocks generally, that’s quite reasonable. Just for reference, I checked the trailing 12-month P/E ratio of Zoom stock and it’s a mind-boggling 653.28.
Plus, Cisco provides a forward annual dividend yield of 3.71%. Income-focused investors ought to appreciate that. Some technology stocks offer much smaller dividend yields or no dividend at all.
Just be advised that Cisco stock has a hard resistance line at the $50 level. The bulls attempted to breach and hold above that level several times this year, but were rejected every time. Therefore, $50 might be a good place to take profits on your Cisco shares.
Is Cisco a Covid-19 Stock?
When we talk about coronavirus stocks, Cisco probably isn’t the first name that comes to mind. Yet, we have to remember that the video-conferencing trend is a function of the onset of Covid-19.
Because of the spread of the coronavirus, some offices closed down their physical locations and/or canceled in-person meetings. There was a big switch to working from home and using video-conferencing platforms.
Zoom was the obvious beneficiary of this shift. However, we already looked at the P/E ratio of Zoom stock. If you’re looking for a bargain there, that ship sailed a long time ago.
Cisco stock, in contrast, looks like another chance to own a video-conferencing stock at a reasonable price point. This, then, begs the question of whether Cisco’s video-conferencing platform, Webex, is competitive in this space.
Webex, by the Numbers
Fortunately, the stats support the bull thesis for Webex and, therefore, for Cisco. Specifically, an impressive 590 million participants were recorded for the Webex app during the month of September.
Furthermore, Cisco is on track to record more than 600 million Webex users million in October. That’s almost double the 324 million Webex participants recorded in March, when the Covid-19 crisis was just starting in America.
Jeetu Patel, Cisco Systems Inc.’s general manager for security and applications business, reports that the number of Webex attendees is at an all-time high. Moreover, Cisco is pushing aggressively to get Webex into more schools.
“We are focused on education very aggressively,” said Patel in reference to Webex. To this end, Webex is rolling out a new product designed for schools. This product offers the ability to host a large classroom and to split a class into small groups, and then bring the class back together.
The Bottom Line
With Cisco stock, value hunters and dividend collectors now have an entry point into the often overpriced tech sector.
And with Webex posting strong user growth, Cisco stock holders can get another chance to capitalize on the video-conferencing boom.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.