Editor’s Note: Money Morning’s Horacio Marquez says Cisco System’s beaten down share price is a great buying opportunity for investors. From a financial standpoint, Horacio says Cisco is virtually bulletproof. It has a $140 billion market cap and no debt. It has strong growth in emerging markets. And it’s shares are going at a bargain price…

Buy, Sell or Hold: Cisco Systems Inc.

By Horacio Marquez

During the Internet boom in the latter part of the 1990s, Cisco Systems Inc. (CSCO) was the king of the “must-have” stocks, with shares of the maker of telecommunications-networking gear soaring 400% from June 1998 to March 2000.

At Friday’s close of $23.61, Cisco’s shares are down 69% from their all-time high of $77.31 and 31% from their 52-week high of $34.24, as most investors realize this will never be the great growth stock that it was a decade ago.

But that doesn’t mean investors should write off Cisco. Quite the opposite, in fact.

When it comes to Internet-infrastructure gear, Cisco remains the proverbial “800-pound gorilla,” the market leader and dominant-industry player.

Cisco recently reported strong earnings, meeting market expectations. Company Chief Executive Officer John Chambers – who is well known for “telling it like it is” – issued some rather cautious comments in conjunction with an upcoming performance guidance that was otherwise fairly strong.

Since then, Chambers has become much more confident in Cisco’s ability to achieve his long-term annual profit growth target of 12% to 17%. As the U.S. economy reaccelerates, technology-related spending by U.S. corporations – which accounts for about half of the capital outlays in this country – should be very robust for three key reasons:

First and foremost is that Cisco’s business, which enables computer-network and telecommunications-system connectivity, is a major way companies can improve productivity.

And right now — despite the ongoing slowdown — US companies are awash with cash, which is typically deployed in the year’s second half.
Finally, the United States actually lags other countries in terms of broadband-network deployment, and needs to close the gap in order to enhance its competitive position in the world markets.

Not that Cisco is a one-trick pony in terms of focusing only on the US market. Indeed, Cisco is a global player and is enjoying very strong growth throughout the world’s emerging markets and in Asia, which includes recent major deals in China and in the left-for dead Japan. The company is even active in Europe, despite that region’s recent slowdown. Broadband is the name of the game and, as one analyst said, Cisco is the “Internet infrastructure king.”

From a financial standpoint, Cisco is virtually bulletproof. It has a $140 billion market cap and no debt. The company last year earned $7.33 billion on sales of $34.9 billion, dwarfing such rivals as Juniper Networks Inc. (JNPR), Nortel Networks Corp. (NT) and France’s Alcatel-Lucent (ADR: ALU).

This year, revenue will advance 13% and profits 10%. After that, investors expect profits to grow at a 15% annual clip — an alluringly brisk rate for a company as large as Cisco.

Investors don’t get many chances to invest in a terrific company at bargain prices. Earlier this month, while the NXTcomm 2008 global-telecom conference was under way in Las Vegas, Cisco’s shares dropped 6.5% – for no clear reason. Some analysts worry that telecom providers – the telephone and cable companies that, up to now, were the key growth drivers at Cisco and its sector compatriots – would go the way of the enterprise sector and cut back on their equipment outlays.

But those fears are overblown. Besides, rival Juniper Networks hasn’t taken market share from Cisco.

Action to Take: BUY. Cisco has once again protected its crown:

[Editor’s Note: Horacio Marquez was working as a vice president of the Merrill Lynch Emerging Markets Fixed Income Group in 1994 when he correctly predicted that both Argentina and Mexico were headed for currency crises - cementing his reputation as one of currency crises for both Argentina and Mexico. Now Marquez brings that expertise to you with the newly created “Shadow Stock Trader” specialized trading service. To find out how to subscribe, please click here.]

Source: Buy, Sell or Hold: Cisco Systems Inc.