Cisco Systems Stock & Options Active Before Earnings (CSCO)

Shares of Cisco Systems (NASDAQ:CSCO) have been trading up at the higher-end of a trading range ahead of the earnings on Wednesday afternoon.  First Call consensus was $0.36 EPS on $9.54 Billion in revenues on last look, although it won’t be a huge shock if those change slightly on the revenue side before the report.

Here was Chambers’ last guidance: The company increased expectations for next year but not focusing on short-term.  Chambers raised longer-term guidance to 12-17% from 10-15% range previously given.  Sees 2008 now 13-16% and revenue guidance for next quarter is 9.45 to $9.55 Billion (versus prior $9.38 Billion estimates).

First Call has next quarter estimates at $0.38 EPS and revenues at $9.81 Billion for the quarter.  The average analyst target is roughly $36.00.  If any last minute changes come in, we’ll do one last update with options pricing expectations etc.

Interestingly enough, yesterday it was a very skewed day on call option buying with over 81,000 contracts in the closest strike prices.  There were over 160,000 contracts in the open interest at the closest strike prices in November call options, which is roughly 16 million shares on a fully leveraged basis.  the last short interest from mid-October was 43.89 million shares, about 1.2 days-to-cover.

• Cisco was one of the windows dressing stocks.
• It just announced its $16 Billion China expansion.
• Here were Chambers’ incredibly strong guidance comments that have kept the shares much higher.
• Shares are right at our own earlier target of $34 now.
• Cicso was Jim Cramer’s #3 Growth Pick for 2007.

Traders will want to obviously stay tuned to Cisco, because this may end up being the "relative value" stock used for the entire web and data communications related stocks from the tech sector as a whole for the rest of the year.  We sent some advanced data on this last week to our free email group where we cover key upcoming events, buyouts, spin-offs, IPO’s, and more.

Jon C. Ogg
November 6, 2007