Cisco Stock Drops to $45.47 in 2023 Amid Downward Guidance Concerns
Explore the latest insights on Cisco Systems' stock performance as the networking giant faces challenges with its future outlook despite steady past growth.
Cisco Systems, Inc. (CSCO) has once again surpassed earnings per share (EPS) expectations for the ninth straight quarter, reporting after the market close on November 13, 2023. However, the stock experienced a notable decline the following day, November 14, due to cautious forward guidance. Prior to the earnings release, technical indicators were signaling potential weakness, with Cisco's shares displaying a "death cross" on the daily chart and trading below critical semiannual and monthly support levels at $51.19 and $50.65 respectively.
As a leading global networking company and a Dow Jones Industrial Average component, Cisco's stock remains an attractive dividend option, boasting a price-to-earnings (P/E) ratio of 15.49 and a dividend yield of 3.10%, according to Macrotrends data. Despite this, the stock has struggled to maintain momentum, hitting a 2019 peak of $58.26 on July 16 before retreating after weak earnings guidance announcements on August 14 and November 13.
On November 19, 2023, Cisco stock closed at $45.47, reflecting a 4.9% gain year-to-date and a 13% recovery from its December 24 low of $40.25. The current price places the stock firmly in bear market territory, trading approximately 22% below its 52-week high.
Historically, Cisco reached its all-time intraday high of $82.00 in March 2000 and its lowest 21st-century price of $8.12 in October 2002. Today, the stock faces critical technical levels, with a semiannual pivot at $50.65 and a quarterly risk threshold at $60.53.
The daily chart reveals a significant "key reversal" on July 16, 2023, when Cisco hit its annual high before closing below the previous day's low, signaling a strong sell indicator. This was followed by the formation of a "death cross" on September 24, when the 50-day moving average fell beneath the 200-day moving average, contributing to the stock's slide to a November 18 low of $44.44.
Key proprietary analytics levels include an annual value level at $39.84, a semiannual pivot at $50.65, a quarterly risk level at $60.53, and a monthly risk level at $51.19, derived from recent closing prices.
On the weekly chart, Cisco maintains a neutral stance, trading below its five-week modified moving average of $47.07 but comfortably above its 200-week simple moving average of $39.23. The stock has remained above this long-term mean since February 2016.
Momentum indicators show the 12 x 3 x 3 weekly slow stochastic rising to 47.41 this week, up from 25.66 in mid-November, signaling improving momentum after previously entering an "inflating parabolic bubble" territory above 90.00 in April 2023, which warned investors to reduce holdings.
Trading Strategy: Investors are advised to consider purchasing Cisco shares on dips toward the annual value level of $39.84, while trimming positions when the stock approaches the semiannual pivot at $50.65.
Understanding Value and Risk Levels: These levels are calculated using the last nine monthly, quarterly, semiannual, and annual closing prices, providing a framework to navigate stock volatility. Pivots, which are breached value or risk levels within their timeframe, tend to attract retests, offering strategic entry and exit points.
Using the 12 x 3 x 3 Weekly Slow Stochastic: This momentum indicator, refined through decades of backtesting, evaluates the stock’s recent 12-week highs, lows, and closes to minimize false signals. Readings above 80 indicate overbought conditions, while those below 20 suggest oversold levels. Readings surpassing 90 are considered "inflating parabolic bubbles," signaling potential sharp declines, whereas readings below 10 indicate the stock may be "too cheap to ignore."
Disclosure: The author holds no positions in Cisco Systems and does not intend to initiate any within the next 72 hours.
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