Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Uncle Frank who wrote (58357)	3/11/2002 12:29:06 AM
From: Jacob Snyder	Read Replies (3) \| Respond to of 77400

Lighten up on CSCO at 20? 2Y chart: stockcharts.com[h,a]dahlnyay[de][pb50!b200!f][vc60]&pref=G For the last 12 months, the stock has been in the 15-20 range, about 95% of the time. The brief rallies above 20 have been good places to sell (the stock, or covered calls). The dips below 15 have been good places to buy. Looks like, once again, we are going to soon bump up against 20. Time to sell again? On the one hand: 1. Cisco is doing a lot better than it's competitors. Clearly, they are in a different catagory than LU or JNPR, and therefore deserve a permanent premium valuation. 2. And, it looks like the recession is coming to an end. We've now had 2 consecutive months of falling unemployment, which has surprised me. So corporate IT budgets should start to increase, soon. The things I've worried about, that might've made this a prolonged or deeper recession, just haven't happened. On the other hand: 1. TA: 20 is strong resistance, it's going to take a complete change in investor's attitude toward the stock, to sustain any move over 20. Lots of people are looking at that chart, seeing how many times we've stalled at 20, or slightly above. 2. IMO, telecom equip is going to be just about the last tech sector to come back, and that's where the growth potential is for Cisco. Selling network equip to enterprises, isn't going to give Cisco 30% growth rates. 3. Valuation: I'd consider a PE of 25-50 (trailing) to be a reasonable non-Bubble valuation for CSCO. That's the valuation range accorded the stock in 1995, 1996, and 1997. Making some optimistic assumptions, Cisco could possibly earn 0.40 in 2003. I'm not going to get into the ProForma vs. Reality debate; let's just assume investors are looking at, and believing, 0.40 EPS in 2003. This would require nothing to go wrong, that could go wrong, and everything to go right that can. Then: 20/0.40 = 50, the top end of my "reasonable valuation" range. And 2003 doesn't start for another 9+ months. Conclusion: any stock price over 20 has to be considered overvalued today. Maybe 20 will be justified by the end of 2003. But it's a long time till then. So, I will start lightening up, when we hit 20. Sell a bit, every point up from there. At 30, I'd be out completely, as I'd consider that to be evidence of a re-inflated Bubble. Actually, there are a lot of stocks that are now at (or close to) very strong resistance levels, and valuations that are making me nervous, and I am beginning to sell them: AMAT at 50 CSCO at 20 TXN at 38-40 In June, my NTAP LEAPs start getting into LT cap gains territory, and I'll probably start taking profits there.