I read full Barrons article on Cisco
I agreed with 90% of its content
it is a horribly overpriced stock, whose purchase demand is built atop brandname, dominance in internet equipmt, and a breakneck pace of key acquisitions
Cisco certainly is the principal beneficiary among internet infrastructure buildout, but the multiples are becoming absurd
if given Nortel's PE ratio, CSCO trades at $35 per share
if given Lucent's PE ratio, CSCO trades at $16 per share
Cisco's growth rates are excellent, but so are Nortel's, and Lucent's have been under question in recent months (but should accelerate again)
so why is CSCO trading at $65 ???
Cisco has kept sales brisk by becoming a primary vendor finance agency ($500M by yearend 1999 recently reduced somewhat)
while at the same time registering doubled levels of deferred financing
I personally wonder if Cisco balance sheet contains a plethora of Dot.Bomb.com clients who will struggle to pay up for delivered product
and then you have the Gilder argument:
that Cisco is not on track with nextgen thick fiberoptic equipment, and will be part of a Y2001 SuperNova
I dont rag them for overpaying anymore for firms like Cerent for yesterday's fiberoptic SONET-based products, or like Arrowpoint for internet software... if they want to pay 1000 times sales for these companies, nobiggee... they succeed consistently in generating 100-fold increases in sales as they drag them under the Cisco umbrella and associate the great Cisco name with the new firm's product
but such acquisition practices tend to dilute the CSCO stock
CSCO: a stock worth between 30-40 per share, at most
just my opinion, of course
/ Jim Willie |
