Cisco Stock Hits New All-Time High, 25 Years After the Dotcom Bubble Burst

Cisco's stock price touched $80.25 on Wednesday, finally eclipsing its dotcom-era peak of $80.06 set on March 27, 2000 -- when the networking giant briefly surpassed Microsoft to become the world's most valuable company. The journey back took 25 years, eight months and 13 days. The company's fundamentals improved dramatically over that period, of course. Revenues have nearly quintupled since 1999, profits have quadrupled, earnings per share have grown eightfold, and margins have remained healthy throughout. Investors who bought at the peak still lost money to inflation for a generation.

Cisco's trajectory draws obvious comparisons to Nvidia, today's dominant "picks and shovels" supplier for the AI boom. Nvidia trades at a price-to-earnings ratio above 45 and an enterprise value-to-sales ratio near 24. At its 2000 peak, Cisco traded at a P/E above 200 and EV/sales of 31.

Imagine

[SlashbotAgent]

Imaging bag holding for 25 years.

You all should feel sorry for me.

Re:Imagine

[Fly Swatter]

That sucks. I bought 10 shares a few weeks ago in anticipation of earnings and sold this morning for a profit. Yes ten whole shares. You all should feel good for me.

Inflation

[Midnight_Falcon]

While the stock is at an all-time high in absolute numbers, the article foolishly doesn't incorporate inflation. Cumulative inflation since 2000 is 80-90%, meaning that in inflation-adjusted numbers Cisco stock is a bit over half its all-time high.

Re:

[JakeThompson1]

That's true but you also have to add in the dividends Cisco has paid starting in 2011, offsetting it somewhat, particularly if they were reinvested.

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[acroyear]

yeah, i just did a check. Adjusting for inflation, the stock price would need to be around $154 to be comparable in value. (Assuming total volume has remained relatively constant in that time).

that is, at $80 now, that means the stock is really worth only $42 in 2000 dollars.

So it is a number that's the same, but the value of $80 if you held onto it this entire time is still far less than you had when you started. Dividends won't quite add up to that gap - if 50c per share per quarter, and you kept the cash

Re:

[acroyear]

note, that was a napkin calculation - i didn't know they started dividends as late as 2011, and I don't know the dividend per share. i just put some numbers in to give the impression, but unlike certain politicians, I'm not trying to prove a point to influence policy decisions. Thought experiment, nothing more. :)

Re:

[Midnight_Falcon]

Yeah, and then if you add dividends you also have to note those are taxed in that year at qualified dividends rates, somewhat negatively offsetting the dividends. It's a complicated math but I think we can see from the basic calculations the stock is not at an "all-time high" realistically.

Now adjust the price

[nullgreen]

... for inflation.

Re:Now adjust the price

[Junta]

True, still not at the peak, but speaking of adjusting for inflation...

Cisco from 1998 to 2001 had a crazy anomalous valuation that was the biggest of the big examples of the dot-com bubble run amok. That behemoth of a company had an inflation-adjusted market cap of about a trillion dollars. Microsoft was in same ballpark, with Oracle and Intel a bit less, but still big examples of the dotcom bubble.

This time around, Google is 3.8 trillion, Meta is $1.6 trillion, Microsoft is $3.6 trillion, Amazon is $2.5 trillion, nVidia is $4.4 trililon, Apple is $4.1 Trillion....

This bubble is just massively bigger than the dotcom bubble, with just one of the big players this time being valued even adjusting for inflation more than all the big players of the dotcom era put together, and there being a fair number more of them this time. It dwarfs the 2007 bubble in these top few players alone. When this pops, it's going to be mind numbingly severe fall..

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[codrus]

CSCO market cap topped out about $530B in Y2K, edging above GE (the most valuable public company before that). It's $317B today, so there's been substantial dilution of the stock in those 25 years, even with the buybacks.

And while it's true that the valuations of tech companies in general are much higher than in Y2K, their revenues are also much higher. Apple's is $400B, and that's not from the AI bubble.

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[larryjoe]

This time around, Google is 3.8 trillion, Meta is $1.6 trillion, Microsoft is $3.6 trillion, Amazon is $2.5 trillion, nVidia is $4.4 trililon, Apple is $4.1 Trillion....

This bubble is just massively bigger than the dotcom bubble, with just one of the big players this time being valued even adjusting for inflation more than all the big players of the dotcom era put together, and there being a fair number more of them this time. It dwarfs the 2007 bubble in these top few players alone. When this pops, it's going to be mind numbingly severe fall..

The dollar numbers are certainly much larger now. However, the PE ratios and the PEG ratios are nowhere near dot-com bubble levels. It could be argued that all the current AI sales will pop all of a sudden, but that's totally different from 25 years ago when the sales were never there in the first place. Only a few companies like Tesla and Palantir have dot-com level PE ratios, and those valuations are indeed crazy.

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[codrus]

The dollar numbers are certainly much larger now. However, the PE ratios and the PEG ratios are nowhere near dot-com bubble levels. It could be argued that all the current AI sales will pop all of a sudden, but that's totally different from 25 years ago when the sales were never there in the first place. Only a few companies like Tesla and Palantir have dot-com level PE ratios, and those valuations are indeed crazy.

While it's true that companies like Nvidia have great revenue/earnings numbers, Cisco had real revenue back in 1999 as well. It's not that nobody's buying the hardware, it's that the people buying the hardware might not actually have a business model that justifies that much hardware purchase, and as soon as they realize that they'll stop buying hardware and suddenly the revenue for the hardware suppliers goes poof.

I suspect that, like with the dotcom bubble, there is something important going on here. It

Re:

[Junta]

Yep, all the biggest from the dotcom era were companies that provided the proverbial pickaxes and shovels, and we *mostly* see that here too (Apple largely being unrelated, Google actually a bit, but not wholly in the game of actually training models, mostly the big players are mostly providing hardware or infrastructure to all these.

The big cautionary tales that everyone remembers like pets.com and webvan had silly high valuations, but no where near the heights attained by Intel, Cisco, Oracle, and Microso

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[account_deleted]

Comment removed based on user account deletion

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[nullgreen]

Yep.

Well, crap sells, obviously

[gweihir]

Apparently, having bad and severely bad security problems in your networking and security products is not a factor when you want to sell them. Nice market failure.

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[Tablizer]

Probably because their rivals are also leaky?

I had the option to take Cisco stock 20 years ago

[OrangeTide]

But I insisted on remaining a contractor, at the time I was more into cash than into accepting hopes and dreams as payment.

Re:

[seoras]

I got Cisco stock 31 years ago, luckily I sold most of it off before 2000.
Regret not holding it a little bit longer but I was lucky and can't complain.

I see the same happening again with the AI bubble.
Another generation of lucky individuals who'll benefit from a stock option leg up like I did.
Will it pop sooner I wonder?
I'd advise cashing in chunks on a regular basis and being happy with what you get rather than holding on and dreaming of more.

Re:

[OrangeTide]

My mentor worked as a contractor and Microsoft didn't have a lot of cash on hand to pay him and offered to pay him half in cash and half in stock, this was back in the mid-1980's. He took the cash of course.

Re:

[antdude]

I wanted to stay contractor if I couldn't become a FTE, but I was told that there was a 1.5 yrs limit. :(

Re:

[OrangeTide]

I was offered FTE from Cisco and when I refused they terminated my contract. The full-time offer was a paycut with worse healthcare than I got through the contracting agency.

Re:

[antdude]

Ugh. Was it Adecco?

Re:

[OrangeTide]

Little outfit called Piepeople Consulting.

Quintupled is going backwards

[Anonymous Coward]

Revenues have nearly quintupled since 1999, profits have quadrupled, earnings per share have grown eightfold, and margins have remained healthy throughout.

If you'd bought gold in 1999 you would have been paying $300/ounce - it's around $4500/ounce currently.

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[account_deleted]

Comment removed based on user account deletion

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[Junta]

Of course pre-pandemic, it was around $1200/ounce, and it's been just insane since the pandemic set in until now...

Mixed baselines

[superposed]

TFS says "The company's fundamentals improved dramatically over that period," but then uses 1999 as the baseline instead of the peak day in 2000. I think thatâ(TM)s how it's possible that "profits have quadrupled" while "earnings per share have grown eightfold": the article skipped over the final 2-for-1 split in Sept 1999. Pretty poor financial reporting though.