Cisco Systems is having a rough time in the market after a recent downgrade from Morgan Stanley. While the firm still maintains the same price target, they have downgraded the stock; citing competition as a key driver for the change of heart. Today, we’ll look at the downgrade in detail, discuss how it has affected the stock so far and what we can expect moving forward, as well as talk about how binary options traders can take advantage of the trends. So, let’s get right to it.
Cisco Systems Downgrade Details
Morgan Stanley recently downgraded Cisco Systems from an “Overweight” rating to an “Equal Weight” rating; insinuating that there’s turbulence ahead for the stock. While the firm did downgrade Cisco System, they still maintain their current price target of $30. So, what’s the reason for the decline? The answer is competition!
Cisco Systems manufactures and sells networking equipment based on internet protocols. These systems are the same systems that power the industry of building automation and brought light to the idea of the “Internet of Things”. However, the Internet of Things is growing rapidly; and as it continues to grow, competition continues to become more fierce in the industry. As a result, Cisco is being forced to spend quite a bit of money on research and development in order to stay ahead of the curve. In doing so, the company’s bottom line is found in danger. The analysts also mention that Cisco is spending quite a bit of money on updating products; but in the rapidly evolving internet of things, these updates aren’t likely to hold up over a long term period of time.
How The Market Reacted
As we’ve come to expect anytime a stock is the target of bad news, declines follow in the market. That’s exactly what happened when Morgan Stanley downgraded the stock; and the downtrend has continued since. In the past 3 trading sessions, Cisco Systems has fallen from a high of $28.98 per share to today’s close at $27.30 per share.
What I Expect To See Moving Forward
Unfortunately, I’m not expecting to see too much positive news out of Cisco Systems anytime soon. Personally, I think that the analysts at Morgan Stanley hit the nail on the head. In addition, if you follow analyst opinions, the vast majority of analysts maintain a neutral or under-perform rating on the stock; with two analysts downgrading the stock since May. Ultimately, Cisco Systems had the benefit of being on the leading edge of technology; making them the name they are today. However, to maintain their reputation, the company will have to work harder than ever; and there are many investors that question their ability to do so. With that said, I’m expecting to see downtrends overall until Cisco finds a way to prove their ability in an overwhelmingly competitive emerging market.
How To Take Advantage Of The Trends
Considering the fact that we’re expecting downtrends on the stock, the best way to take advantage of these trends is to purchase put options. However, in the world of binary options trading, it’s important to remember that timing is key. With that said, binary options traders should keep an eye on the stock; looking for resistance. Once it reaches resistance on an uptrend, we know that strong downtrends are incredibly likely; so, it’s time to buy the put options to take advantage of the trends to come.
What Do You Think?
Where do you think Cisco Systems is headed and why? Let us know in the comments below!