Firm's market cap climbing to $1 trillion

Discussion in 'Wall St. News' started by S2007S, Oct 13, 2010.

  1. S2007S


    Before running right into the article itself, sit back take a deep breath and take a look at the date, laugh quietly to yourself and jump in and read the article. As you can see over 10 years ago the hype was coming from all angles, I could find infinite articles like this so that you can actually understand the hype that wall street and the fucking foolish analysts spew out on a day to day basis. Keep in mind this article was written at the top of the nasdaq bubble and I am sure people who read this felt comfortable buying csco after it collapsed, losing more than half its value over the next 12 months, keep in mind after it fell 50% to the $50-$60 range it collapsed another 50%, I am sure people ran in then to buy some around $20-30 range only to see it collapse another 50%, by 2002 it was in the single digits. Since that time the next credit bubble pushed csco to the $28-$32, thats been it since then, right now csco has an approx $130 Billion dollar market cap far from the $1 trillion dollar market cap this fool was screaming about in 2000.

    Friday, March 17, 2000
    Firm's market cap climbing to $1 trillion
    Silicon Valley / San Jose Business Journal - by Dennis Taylor Business Journal Staff Writer

    One trillion dollars.

    That's how much at least one analyst believes Cisco Systems Inc. will be worth in a few years--and you'd be hard pressed to find anyone to disagree.

    The San Jose-based networking behemoth's stock closed March 14 at $131.75 a share, slightly down from its March 10 one-year high of $141.88 (The entire Nasdaq slid 4 percent on March 14.)

    Thirty-seven investment banks recommend either a "buy" or a "strong buy." None recommend a "sell" or even a "hold."

    On any given day the volume of Cisco shares traded is the equivalent of every man, woman and child living in California--having hit 33 million as recently as March 9.

    George Kelly, an analyst with Morgan Stanley Dean Witter in New York who took Cisco public a decade ago, is one of the Cisco bulls. Cisco's stock is trading at roughly 120 times Mr. Kelly's earnings' estimate of $1.13 per share.

    The multiple, or price-to-earnings ratio, is a number that places a value on a stock. It is a ratio of the price of the stock to the profit of a company expressed per shares outstanding.

    "A low P/E usually signals investors are uncomfortable," Mr. Kelly said.

    As a reference, in 2000 Cisco's multiple of 120 compares to Microsoft Corp.'s multiple of 55 and Intel Corp.'s multiple of 42. Yet their values are below Cisco.

    "One of the reasons investors value Cisco so highly right now is that, unlike Microsoft, Cisco doesn't have the uncertainty of a Justice Department settlement--it's a much cleaner situation," Mr. Kelly said. "Second, Cisco has had a tremendous track record of continuous upside surprises. And Cisco is viewed as opening several new markets, the biggest of which is optical, which is expected to be an explosive market."
    Perfect returns

    Paul Weinstein, an analyst with Credit Suisse First Boston, believes a $1 trillion market capitalization (stock price multiplied by shares outstanding) is within reach in a few years. He said Cisco's stock has increased 1,000 times, a perfect 100 percent annual return since it launched its IPO in 1990.

    "We humbly submit that over the next two to three years, Cisco could be the first trillion dollar market cap company--and don't think they wouldn't love it," Mr. Weinstein wrote in his "strong buy" recommendation.

    As of March 14, Microsoft's market cap stood about $510 billion, compared with Cisco's $465 billion, which is threefold the annual revenue of the state of California.

    Michael Neiberg, lead analyst in the communications equipment sector for Chase Hambrecht & Quist in New York, said Cisco is turning a lot of investors long-term.

    "If you had picked a price point to sell [high] at anytime in the past 10 years, you would have been wrong," he said. "They have such an impressive track record of growing ... that the financial community isn't thinking in terms of a multiple of what they're earning this year, but what they will be earning three or four years down the line."
    An opposing view

    There are market watchers that are dubious, however, about the high valuation assigned to a large-cap company like Cisco.

    Jeremy Siegel, a finance professor at the Wharton School, wrote this week in The Wall Street Journal that the high valuation assigned to large-cap technology stocks--Cisco is at the top of his list--are unsustainable.

    "History has shown that whenever companies, no matter how great, get priced above 50 to 60 times earnings, buyer beware," Mr. Siegel wrote.

    His statistical research concludes when companies reach big-cap status--ranked in the top 50 by market capitalization--their ability to generate long-term double-digit growth slows dramatically.
    Young bucks in a different field

    Looking at multiples of high-flying valley gazelles that compete with Cisco is almost meaningless.