Monday, May 7, 2007

Cisco (CSCO)

I have taken a profit on Cisco Systems (CSCO) as the stock has run higher into earnings tomorrow.

An interesting note from AmTech says CSCO is likely to beat the street for the April quarter and perhaps even point to solid areas of performance for the July quarter. But AmTech also expresses some words of caution:

"For the July quarter, we are modeling $9.25 billion and $0.37 (vs. consensus at $9.23 billion and $0.33). However, we are concerned that softer US enterprise trends may cause CSCO to temper revenue expectations. Our sense is that investor expectations have gone from low to high, making near-term stock upside less likely."

Today over 24,000 May 30 calls have traded. Remember this is a stock priced more than $2 below that strike with 9 sessions to go before expiration. That just smacks of more market mania. If you really think CSCO has a shot at $30 post earnings, June 30 calls, while still high risk, is a heck of a lot better than the lottery tickets that the May 30s are.

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