Zeev's Turnips - No Politics Message Board

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Strategies & Market Trends : Zeev's Turnips - No Politics

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To: Zeev Hed who wrote (1627)	10/25/2001 8:15:06 PM
From: marginnayan	Read Replies (3) of 99280

Something to consider for your turnips: Nov 6 is FED meeting. 1/4 cut a given. Nov 6 is Cisco's earnings. Cisco management is indirectly telling the world that the Q is in the bag and next Q should hopefully be okay. Chris of MSDW changing his tune on Cisco for the first time after being bearish on networking stocks (except JNPR). Other analysts of MSDW for telco equipment stocks are still bearish. Cisco started this NAS rally with positive comments from Mr. Chambers. It is possible that Cisco's earnings may decide the next course of action for NASDAQ. ---------- Cisco Systems (CSCO-$17-O-V) Raising Target - Margin Expansion Story in 2002 C. Stix dated 10/25/2001. F1Q02 preview - We believe CSCO will report revenue of between $4.17-4.30B and EPS between $0.02-0.03. We are carrying EPS of $0.02 and revenue of $4.17B (down 36% Y/Y, 3% Q/Q). Guidance will be the key. Growth remains the question mark; Margin expansion is the reason to own - CSCO's long-term growth rate continues to be uncertain. We believe CSCO can significantly increase gross and operating margins in 2002, due to low cost of inventory and further cost reductions. Valuing off of normalized earnings - We believe that normalized earnings for CSCO are in the $0.47- $0.60 per share range. We maintain our Outperform-V rating and raise our 12-month price target to $20. Based on normalized earnings of $0.55 and a 1.5x market PE multiple (21.6x on the C2002 S&P), we can justify a price of $19-20. Just few weeks ago: --------------- Cisco Systems (CSCO-$14-O-V) F1Q02 On Track Christopher Stix Dated 10/8/2001 In a conference presentation yesterday, CSCO CEO John Chambers indicated the he was comfortable with Street consensus estimates for F1Q02(ends Oct) of $0.02. We slightly raise our numbers. We raise F1Q02E EPS to $0.02 on revenue of $4.17B (down 36% Y/Y, 3% Q/Q). We keep C2002E and C2003E EPS at $0.22 and $0.42, respectively. How can this be? Our previous checks on CSCO showed some weakness in the business. CSCO does have some flexibility in reporting numbers due to large backlog ($2B). We maintain our Outperform-V rating and 12-month price target of $16, which is based on a long-term residual income model.

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