Microsoft, Cisco: New Developments to Move the Needle?
The S&P traded higher on Tuesday with market pros squarely focused on the tech sector and some major new developments.
As you likely know, Microsoft made a bold move on Tuesday and announced plans to buy internet-phone company Skype for $8.5 billion in cash.
However, another development caught the attention of the Fast Money desk.
Widely followed BGC analyst Colin Gillis slapped a ‘Buy’ rating on beleaguered Cisco with a 24 price target.
How should you interpret these developments? Do they signal upside for either Cisco or Microsoft?
- Top Strategist: Cisco Upside is Much Greater Than Downside
Looking at Cisco first, in a live interview on CNBC’s Fast Money, Colin Gillis tells the Fast traders when it comes to this company, “the upside is much greater than the downside.”
Not only does he think the stock has been oversold, he believes Cisco is looking at growth down the road – strong growth.
“The most important change in technology is the smartphone explosion,” he says. Looking at the mobile data landscape he explains current infrastructure isn’t nearly robust enough to handle the skyrocketing demands of users. “And all that structure (that needs to be built) will require Cisco’s plumbing,” says Gillis.
Trader Steve Cortes just can’t get on board. “A quarter of Cisco revenue comes from public sector spending, but state a local governments are retrenching hard,” he says.
Gillis counters, at 9.6 times – it’s already priced in.
- Hidden Winners from Microsoft Acquisition
As we mentioned above, Microsoft landed in the headlines on Monday, after it announced plans to acquire Skype for $8.5 billion in cash.
None of the Fast Money traders were particularly enthusiastic about the deal, though they all concede there’s probably some synergy that will be created. In the near-term, however, the traders do not see the deal as a buying opportunity.
”This is not going to be a needle moving transaction for a company that clearly needs to do something needle moving,” says Gary Kaminksy.
However Steve Cortes does see two hidden winners -- Morgan Stanley and Goldman Sachs. He explains that the acquisition may be a sign that companies sitting on hoards of cash may be looking to put that money to work. And as M&A accelerates the investment banks should benefit.
Elsewhere in the market, the traders were also keeping a close eye on China, after new data showed exports hit a record in the month of April.
What’s the trade?
Brian Kelly takes developments as a sign that China is re-accelerating. "I’m a buyer of China A -shares. The way to play it is long CAF ," he says.
Trader Steve Cortes is on the other side. He feels China tightening was a key driver behind the recent sell-off in commodities. He's short emerging markets via the EEM and long an equal amount of the S&P against it as a bet "capital comes back home."
EAR TO THE WALL: EXCHANGES
Oil landed in the spotlight on Tuesday after the CME raised the margin call on crude futures again, it's the 4th time since February.
Should you take the move as a sign that exchanges are feeling the pressure to contain oil?
What’s the trade?
Trader Jared Levy says that in the short term, oil will probably pullback on the news but long term he expects it will continue to march higher.
According to trader Steven Weiss, at least some pro traders are wondering if the administration had anything to do with the increase.
Got something to to say? Send us an e-mail at email@example.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to firstname.lastname@example.org.
Trader disclosure: On May 10, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jared Levy is short (PCLN) options. Jared Levy is short (BAX) options. Jared Levy owns (AAPL) options. Jared Levy owns (RIMM) options. Jared Levy owns (AMT) options. Jared Levy owns (SWKS) options. Levy owns (VXX) options. Jared Levy owns (EOG) options. Jared Levy is short (SPY) options. Jared Levy owns (HD) options. Jared Levy owns (IBM)options. Jared Levy owns (OIH) options. Steve Cortes owns (K), (KFT), (SO), (EXC) and (TGT). Steve Cortes is short Nasdaq Futures. Steve Cortes is short EUR vs. USD and CHF. Steve Cortes is short EEM vs. S&P long. Stephen Weiss is short (AKS). Stephen Weiss is short (X). Stephen Weiss owns (EMC), (INTC), (JPM), (MSFT), (QCOM), (VZ), (UUP), (TBT), (DE) and (SWC).
Accounts Managed By Brian Kelly Capital are long Aussie Dollar
Accounts Managed By Brian Kelly Capital are long Mexican peso
Accounts Managed By Brian Kelly Capital own (EBAY)
Accounts Managed By Brian Kelly Capital are long natural gas
Accounts Managed By Brian Kelly Capital own (SLV)
Accounts Managed By Brian Kelly Capital own (BHP)
Accounts Managed By Brian Kelly Capital own (MCP)
Accounts Managed By Brian Kelly Capital own (LYC)
Accounts Managed By Brian Kelly Capital are short U.S. Dollar
Accounts Managed By Brian Kelly Capital are short Swiss franc
Funds Managed by Donald Yacktman owns (MSFT)
CNBC.com with wires.