Talking Numbers

Cisco’s wild ride

Cisco's wild ride
VIDEO2:2802:28
Cisco's wild ride

Cisco shares moved lower in extended trading Wednesday despite reporting better-than-expected earnings.

The network equipment maker announced its first-quarter earnings after the bell Wednesday. Earnings per share came in at 54 cents, 2 cents above Wall Street estimates. Revenue also came in higher than expected, at $12.25 billion, versus $12.16 billion.

The stock gave up its initial after-hours gains when it said on an earnings conference call that it lowered its second-quarter guidance. The company expects sales to gain anywhere from 4 to 7 percent, opposed to the average analyst estimate of 8 percent.

Shares of the old tech giant are outperforming the broader market year-to-date, up 12 percent. But, could the run be over?

(Read: Cisco current-quarter outlook disappoints)

"We are cautious around the fundamentals of Cisco," said Pacific Crest's senior research analyst Brent Bracelin. "Operating margins have expanded from 26 to 28 percent, and from a timing standpoint we think now is the time the company will begin making investments, that will weigh on their margins and ultimately weigh on EPS growth and multiple expansion going forward. "

Bracelin, who rates Cisco as a "sector perform" and has a $25.15 per share price target on the stock, said he advises investors to sit on the sidelines for the time being. "[Cisco's] still a great company, they've done a great job executing, it's a cheap stock, but it's really just more of a timing issue," he said.

But according to one technician's work, the stock could rally another 27 percent from current levels in just a few months.

"If we go another 75 cents higher in Cisco, we could hit $32 per share by next year," said John Kosar of Asbury Research.

"The key level is actually at $25.90 [per share]. If we can get up above there, we basically get out of a sideways pattern that we've been trading in for the last year and we pick up that 2011 trend higher," Kosar added. "Most of the time when we get a sideways move like this, you usually end up going out of it the same way you came in and in this case, that's higher. Above $25.90 I think you could go to as high as $32 per share."



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