Markets are reacting too negatively to lowered guidance and short-term headwinds
While the novel coronavirus pandemic has upended several
sectors, some industries are doing better than others. One such sector is tech.
SPDR S&P Software & Services ETF (NYSEARCA:XSW) is up by 41.74%
compared to the S&P 500, which is up by just 22.73%. One of the major
contributors to this enormous success is Cisco (NASDAQ:CSCO) stock.
Many will remember the company from the dot-com bubble burst
in the late 1990s. Cisco stock reached some astronomical numbers during that
time. And although it hasn’t scaled those heights since, it is one of the most
consistent stocks around, up approximately 33% over the last five years.
And why not? Cisco has an excellent balance sheet with very
little debt. It also boasts excellent operating metrics, juicy dividend yield
and is trading at a steep discount to the sector. With so much going for it,
it’s hard to argue against Cisco stock right now.
Cisco Stock Is a Bargain
Although Cisco stock has recovered a bit from the drubbing
it received at the height of the pandemic in March, shares are still trading at
a 25.79% discount to the 52-week high of $50.28 per share. You can chalk that
up to the global economic slowdown brought about by the pandemic. However, not
all is doom and gloom. Several companies are in the race to manufacture a
commercial Covid-19 vaccine. So, the slowdown should start letting up soon, and
hopefully, pent up demand will make up for any lost sales.
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