Hello Jurgis,
I'm positive (though less so than I was 3 months ago) on CSCO in general after doing more research over the last few days on this last earnings report, but I'm curious as to why you don't think it's cheap until the 16's? Have you attempted a DCF analysis on CSCO? My quick ones imply to me that CSCO is undervalued at current price levels.
What I see is that CSCO is not doing so well in its legacy product lines, but its services business is growing (with strong margins). And new product lines are growing at a pretty good clip.
I guess my overall thesis is this:
CSCO is not a $300+ Billion value company anymore. It's closer to $100 Billion, and less if you back out some of the cash. To me, without growth, it's current cash flows justify at least it's current valuation and I have confidence that CSCO can leverage it's brand name and technology to achieve growth in new product markets.
That being said, I don't see CSCO doubling in value over the next five years. My view is more that it should be worth $22-$24/share right now. It could (and probably will) go down here more, but I see the downside more limited than the upside.
So, in this market, where I have little cash, I'm considering rotating some of my higher beta names that may be a bit toppy into more CSCO to play for a potential bounce in the medium-term with less downside when we correct.
So, I believe CSCO is a decent place to park money these days in this market, but I'm not pounding the table either.
Thanks,
Grant |
