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

To: Stock Farmer who wrote (53225)	5/20/2001 3:23:22 PM
From: RetiredNow	Read Replies (2) \| Respond to of 77399

OK. Let's be conservative and say that Cisco grows to be a $50 billion company by 2005 and $100 billion by 2010. Net margins of 15% would have them earning around $15 billion, with EPS of around $1.50. At a PE of around 35, justified by the fact that Microsoft still has a PE of 38 long after their PC market has matured (which the networking market has not), that gets you to $52.5 per share. That represents a 150% gain from here or around a 12% return per year. However, if we use your revenue figure of $233 Billion, which I think is overly optimistic, we get a stock price of $122, which is a 600%+ gain from here, or 40% return per year. So the truth is somewhere inbetween those figures and either end of the spectrum is not a bad place to be 10 years from now. In the mean time, this stock will fluctuate dramatically. For instance, when the economy recovers, the stock will rocket upwards, defying all logic. Then in the next downturn it will plummet to lows that again defy all logic. I'll have to evaluate at those times whether I want to hold on or not. Evaluate to me will mean, is the company still at the top of it's game. If not, then I'll bail. If so, like I still believe them to be now, I will continue to hold. Even when all the networks in the world are completely built out, the large networking vendors will still be stocks to hold, because they will still sell equipment that makes those networks more efficient and keeps the bandwidth bottlenecks unclogged. The networking companies will one day provide bandwidth in the same ways that Enron and Exxon provide energy today, and their stock prices and PEs will come down to reflect that stability. But for now, expect to pay a premium because you are paying for the outsized growth to come.