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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 74.40

-1.4%

Jan 14 3:59 PM EST

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To: Lizzie Tudor who wrote (65669)	7/1/2004 1:55:54 PM
From: Elroy	Read Replies (1) of 77400

When will CSCO hit $40? That would imply a market cap of about $250 billion. Assuming CSCO's cash position stays at about $20 billion, a $40 share price would imply about a $230 billion enteprise value. CSCO generally trades at about (or above) 23x earnings if you exclude their cash position from the share price, so I think CSCO stock will hit $40 (and the company have a value of $230 billion) when the company is about to generate $10 billion in net income over the next 12 months. That's about $14 billion in pre-tax operating income. Since CSCO's operating margins are about 30%, that implies annual revenues of about $47 billion (yowza!). So how long will it take for CSCO to be about to produce $47 billion in revenues? I think CSCO is expected to do about $23 billion or so over the next 12 months, and if they can grow revenues at a Dell-like 18% per year, it will take them 4 years to have $47 billion in expected revenues. So, the easy answer is, CSCO shares will hit $40 in 4 years, give or take a year! Next question?! Elroy Time to go watch the euro-cup semis (Czech versus Greece)! Maybe when I get back in a few hours the market will have turned around and CSCO will have made it half way to $40.....??

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