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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: PMS Witch who wrote (45338)	12/21/2000 5:54:15 PM
From: bambs	Read Replies (2) \| Respond to of 77400

one thing i like to keep in mind when I look at big cap stocks like csco is the real value long term and to do this I try to imagine how it will be valued why down the road... I think it's clear that by 2010 csco will have well over 10 billion shares outstanding... I think one can assume that it will be more difficult to grow revenue and earnings as csco gets bigger. I think one can also assume that when csco gets to the 100 billion revenue level it will be very difficult to grow revenue by more then 10% a year for the years after...considering that it's actual earnings growth rate now (at the peak of a booming economy) is 28.8% I think that as time goes on we will see margins decline and gains from investments make up only a small part of earnings...I there for think that even if csco gets to that point where it has 100 billion in revenue it may only have 10 billion in actual earnings. I think the long term earnings growth rate will could be about 10% at that point and that would call for a p/e of 15. With that in mind I think that csco could be valued for as little as $15 dollars down the road. This is the reality one must face when investing in a stock like csco that has billions of outstanding shares...plans to print lots more...billions in options...a current price to revenue around 15 or so...(hard to keep track these days) I'm not saying this will happen for a fact but I think it could be very likely...that's why I think that csco is a stock with too much risk for long term holders. Through in vendor financing, a possible recession, world financial crisis (as warned by bank of england), huge trouble in the bond market, a major slow down in cap ex spending...it don't look good. Just to get to 100 billion in revenue would be a huge task...to go on from there with a high p/e would be insane. At some point the p/e will have to come down...everyone must admit. Even if you say that by 2005 csco should have a p/e of 20...on 10 billion shares and a stock price of $35 that would give a market cap of 350 billion and actual earnings of $17.5 billion. Take last years of 3.2 billion. Say 30% growth in actual earnings for the next 5 years (I doubt it will be 30% i think less but lets assume they grow actual earnings more then they did last year every year for 5 years.) 4.16 bil for 2001, 5.4 bil 2002, 7 bil 2003, 9 bil 2004, 11.8 bil 2005, 15.4 bil 2006! The numbers don't lie! What are you buying when you buy and hold csco? Bambs