Thursday, October 25, 2007

Quiz – What won’t hold $30

Unfortunately one of my favorite stocks is looking technically weak and is likely to drop below the $30 level. On many good market days, it trails the market or drops. On down market days, the stock exceeds the index downside regularly. The recent up moves have small volume, and the overall short-term price trend is down. While the stock is still generally correlated with the overall market, it is showing a comparative weakness over the last few weeks. If it falls below $30 then it is likely to dive towards $28.

Fundamentally the stock is worth much more, and many analysts have projected prices above $38. The company has solid revenue, growth prospects, and free cash flow. Let’s hope the upcoming conference call in a couple weeks sparks some life back into the price and reverses the recent trend because this business has a lot to offer.

I believe that most of the audience can pass this quiz by naming the symbol….


Glenn said...

Unforunately Greg, I do know the answer: CSCO! Hope all is well.

GregB said...

First I would like to thank everyone for their emails over the past couple of days about CSCO. Unfortunately, sometimes I am painfully right. CSCO was appearing to be very technically weak over the past several weeks, and did not have solid momentum or volume going into the earnings report. This leads to the result where the stock has taken a dive below $30 and is likely to land up trading in the $26 to $28 range.

However everyone should keep in mind that this is a short-term situation. It is more important to keep an eye on the long-term prospects for the company. Cisco has great cash flow, earnings, and other very positive fundamental attributes. Ignore the short term pricing of the stock because the long-term picture is sunny! This is a minor bump in the road that will work itself out in time.