Lucius and thread,
From Prudential's Research (issued 1/13/99)
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CISCO SYSTEMS-- Favorable Business Trends Should Result In A Good Quarter. (CSCO--$98 1/8--STRONG BUY/Select)
For Cisco's January quarter, we are modeling EPS of $0.35, based on sales of $2,740M (5.9% sequential growth), a gross margin of
65.1% (vs. 65.5% in the October quarter), and a sequentially flat operating expense ratio at 35.7% of sales, which yields an operating margin of 29.4% (down from last quarter's 29.7%).
With about two weeks still left to go in the quarter, our sense
is that demand remains strong. In the enterprise, Cisco is benefiting from Year 2000 spending which should continue for the next quarter or two. We are anticipating a strong showing from Cisco's carrier business in terms of revenues and orders. The company announced several new orders with carriers around the world,
and the tone of business with existing carriers appears healthy.
We are also raising our 12-month price target for Cisco shares to $117, based on a P/E of 62 times our forward-four-quarter EPS estimate of $1.89 for the February 2000 through January 2001 period. This would put Cisco at 2.00 times the P/E of the S&P Industrials (P/E of 31.0 as of last night's close), which is the top of Cisco's
relative trading range over the last seven years.
Ibexx
(long CSCO since 1990.
commons, LEAPS calls,
short puts)
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