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

To: Jacob Snyder who wrote (54412)	8/8/2001 4:50:03 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 77400

good post, Jacob... IMO, Cisco is a "growth cyclical", like the semi-equips. A "mature cyclical" might be worth a P/S of 2. A company that, over the LT (average over several cycles), grows EPS at 25%/year, is worth more than a P/S of 2, even if every decade or so, demand for their products goes away for a year or two. i agree with the growth cyclical characterization. i doubt csco can do 25% CAGR for a decade of EPS from normalized earnings of, say, 25 cents a year. even if they did, the IRR might not look too pretty if you fade to trend from there. i am afraid there is some really ugly devaluations in store for many tech cos. still yet ahead in the coming year. whether csco gets to a PSR of 2 (i.e., share price of <5) seems doubtful...my guess (this is only a guess!) is an ugly slow burn down to the 8 area in three years, where it might stay for 5 years more before becoming what i would consider a good investment. and csco is just one tech company of many that would need to undergo this type of severe devaluation to become attractive to me. while some people might balk at that, i think it is pretty natural in the scheme of things. the US market, and techs in particular, had a fantastic decade in the 90s. it's quite natural for an asset class that has outperformed in one decade to underperform severely in the next decade. just compare gold in the 70s to gold in the 80s; japanese stocks in the 80s to japanese stocks in the 90s; and US tech stocks in the 90s to...OOPS! i did it again. I really wish Chambers would quit with the 30-50% LT growth forecast. Every time he repeats it, he puts more pressure on Cisco's Creative Accountants maybe they put some pressure on him, because he finally backed off that 30-50% number (calling it a "stretch") and suggested 15-30% might occur. gee, 15-30% or 30-50%? i guess that means 15-50%? which means chambers has no idea? here's what briefing said last night on the subject: For those trying to decide whether they should pay over 70 times next year's earnings (probably more after EPS forecasts are revised lower), the difference between 15% and 50% long-term growth is no trivial issue. It is the difference between a bargain (if 50% growth) and a joke (if 15% growth).