I have not gone over Cisco’s ([stock CSCO]) earnings (transcript of call), this is more about the last two days when I was asked about Cisco by a friend. I said that the $18 calls for August and the $16 puts for August looked good. They were very low-cost. Initially, I thought Cisco would follow the other companies and report bad earnings.
The first thing that struck me was that most others had some pre-earnings news to prime the market for an earnings miss. Cisco had no such news. Then there was JDS Uniphase ([stock JDSU]), which also beat earnings. That made me think Cisco might do okay. No way I could be sure. I followed Cisco last quarter, but this quarter was a mystery to me. I was not sure what the next product driving Cisco would be. However, knowing the macroeconomic environment but with the other evidence of no early negative earnings news and JDSU doing well it does create a trade idea. I went with the $18 calls and $16 puts because they were very cheap. Cisco did pretty well after hours and the $18s might do well. I can’t know for sure until tomorrow. The point is sometimes you really should go with your gut. Also, I should have written this article one day earlier.
That is fine, next time I will pay keener attention, and try to capitalize on these kinds of cues. Overall I like Cisco, and I think its due for a rise past $20 again. In my opinion the crushing decline of the last quarter was completely irrational. Cisco did well, but just gave a bit more conservative guidance and the market freaked out. However, this quarter all those high-flying companies are saying they missed early and get hammered. Cisco is saying the course. This was also the FY 2012 earnings report, so some digging would be nice. I hate non-calendar quarters.
I will do more research on Cisco later. For now, just keep an eye on mundane things like what others are doing. I know this is actually a common thing. The JDSU beat is one of those things that other people jump on too. However, the pattern about the companies releasing bad news early wasn’t mentioned regarding Cisco. It is not definitive, but if you notice it and your gut tells you somethings you should look into it.
Word of advice really be careful on the Yahoo! Finance Message boards. They had nothing but vitriol for Chambers after last quarter’s call. Well whose laughing now. I trade options, but even I know those guys have a short-term myopic view. Not all of them, but so many posts make me sad at times.