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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 71.07-1.4%3:59 PM EST
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To: Sly_ who wrote (41243)10/22/2000 12:09:50 PM
From: RetiredNow  Read Replies (3) of 77397
 
You know, Sly, that Barrons article is a piece of trash, as well as Parish's comments. However, there is one nugget of truth that merits keeping a close eye on. When pooling gets retired (think the 1/2001 date was postponed, but don't know for how long), this will mean Cisco will start having to account for all acquisitions as a purchase. That's going to be a serious drag on earnings. Then also, in years when there isn't the massive sales of Cisco's employee's options, Cisco won't get nearly as much tax benefit, which means much less operating cash flow.

Then in addition to the two things above, everyone knows that Cisco has defied the law of large numbers for the last 8 quarters in a row. So it is inevitable that in the next few quarters, the revenue growth rate will start to slow. This coupled with slowing earnings growth rate means we are at the start of a period of PE contraction.

Now all is not lost. I am betting that Earnings will grow fast enough to more than offset the PE contraction. In fact, I am betting that we still get a 40% growth in stock price this fiscal year (to at least $80) and and a 30% increase next fiscal year (to at least $100).

P.S. Does anyone know when companies have to stop using pooling now that the 1/2001 date was postponed?
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