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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: johnzhang who wrote (30516)	8/28/2000 2:31:11 PM
From: fedhead	Respond to of 54805

No the router market is going to be fine and so is JNPR. All I am saying is a lot of JNPR's growth is priced in at current valuations. But hey it could go a lot higher. Anindo

To: johnzhang who wrote (30516)	8/28/2000 7:32:45 PM
From: the dodger	Read Replies (4) \| Respond to of 54805

"...Please elaborate! Do you think the router market will not that big, or Juniper can't grow its sales that fast?..." I just don't get it. I hear a lot of investors are calling JNPR "the next Cisco" -- somehow suggesting that their admittedly great router will lead to a CSCO-like stock performance. But I don't care how great their router is, I think you'd have to have rocks in your head to buy Juniper at these levels -- especially if you think you're going to get anywhere near a CSCO-like stock ride out of it. I doubt there's a CEO alive that wouldn't be tickled pink to repeat CSCO's 1990 - 2000 performance...and that includes John Chambers, and whoever the guy is driving the bus over at JNPR. Cisco grew revenue by about a 100-fold in that period. But even if JNPR duplicated CSCO's performance -- had the exact same explosive revenue growth that CSCO -- same # of stock splits -- same everything --it still doesn't make sense to buy JNPR right now. Here's why... Cisco went public at about $14 a share...and each share gave you ownership of about $5 bucks of CSCO's revenue. With split adjustments, that original share would have grown into 288 shares today...and those shares would give you ownership of about $810 of CSCO's revenue today...or about a 160 X increase in revenue ownership. But in contrast, a share of JNPR costs you about $200 bucks today...but only gives you control/ownership of about 80 cents of their revenue. In other words, you're being asked to pay about 100 times more for the same about of revenue ownership. So even if JNPR were incredibly lucky enough to duplicate CSCO's awesome 100 X growth over the next 10 years...you'd still only end up with revenue ownership of about $80 per share. In other words, if things go absolutely "perfect"...i.e..meaning JNPR duplicates CSCO's 1990 - 2000 performance, you're buying JNPR at 2.5 X FY2010 revenue. No thanks !!! (And no -- stock splits don't matter in this example.) Put another way, this would have been about like paying $1400 a share at CSCO's IPO. And I know there's a few of you saying..."yeah, but you would have still made a ton of money". -- and you'd be right, but that has a lot to do with fundamentals in the general economy over the last 10 years. PE rates have been expanding because of falling inflation/interest rates. Cisco made about 50 cents a share (I'm working from memory here) in 1990 -- the year they IPOed...giving them a PE ration around 28. And what's CSCO's PE today - 180? That's about 500%-600% increase. What's JNPR's PE today -- somewhere around 1350 ? Do you honestly think JNPR can grow their PE ratio 500-600% to 7500 over the next 10 years? Because that's what it would take to duplicate CSCo's stock performance. One last jab -- CSCO expanded their market-cap about 230,000% in the last 10 years, going from about 200 million to 460+ billion. JNPR currently has a $60+ billion market-cap. Does anybody out there really think they've got a shot at gorwing to anywhere near 138 TRILLION market-cap in FY2010 ?!!! That's about 8 X the current value of every stock listed on the NYSE/NASDAQ combined. Now there's a red-flag if I've ever seen one. But again, that's what would have to happen for JNPR to duplicate CSCO's 10-year stock performance from here. td