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Tuesday, May 6, 2008

Cisco (CSCO) guides 4Q:2008

The US remains cautious and emerging markets are also articulating caution going forward. Cisco says they'll continue to take share against competitors and that they almost always outgrow the economy. They guide up 9-10% y/y for 4Q, which equates to the consensus of ~10.3 (the low end of forward guidance) and 10.37 bil. They reiterate their long-term guidance of 12-17%.

Anti-climactic. But fine. The stock is trading off a bit and is only up 40 cents post-market. The stock had a pretty good run prior to the number. Cisco is still the dominant player in most of their markets and continues to maintain a magical margin structure that rarely wavers. They're going to make $1.70 next year and they've told us they're going to grow at a 14.5% midpoint in perpetuity. They're basically telling you the stock is worth $24.65, which would be 14.5* earnings... if you're a purist and you believe in basic growth stock valuation analysis, that is. Cisco typically garners a premium to that valuation.

I don't think these comments or outlook will break tech out but I've been wrong before. We'll see.

1 comment:

Patrick said...

Roy,
The question I have been asking for years.. What do you pay for a growth stock which is now cyclical.? Rhetorical I know, but in tech land I would contend no more than 3x sales. Like the blog.
PJG

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