30-Year History of Cisco vs. Nvidia Stock: Bubble Bursts & Cautionary Tales
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- Опубліковано 14 лют 2024
- Delve into the fascinating 30-year journey of Cisco ($CSCO) and Nvidia ($NVDA) stocks, exploring their meteoric rises, dramatic bubbles, and cautionary tales. From Cisco's astounding growth in the 1990s tech boom to its subsequent bubble burst in 2000, where its value multiples collapsed never to fully recover, to Nvidia's recent surge and parallels drawn to historical bubbles. This video uncovers the lessons learned from these rollercoaster rides in the stock market, offering insights into the dangers of overvaluation and the importance of long-term sustainability. Whether you're a seasoned investor or a curious observer, this retrospective offers valuable insights into the complexities of the stock market and the risks of speculative frenzies.
"Long ago, Ben Graham taught me that 'Price is what you pay; value is what you get.' Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down." - Warren Buffett
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All opinions expressed by Cameron Stewart at Rational Investing with Cameron Stewart, CFA or on Cashflowinvestingpro.com are solely Mr. Stewart's opinions. You should not treat any opinion expressed by Mr. Stewart as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Mr. Stewart's statements and opinions are subject to change without notice. Past performance is not indicative of future results. Mr. Stewart does not guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this show. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this show may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this show. Before acting on information on this show, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.
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Comparing NVDA to CSCO is daft. If anything, NVDA should be compared to MSFT in the 1990s. Cisco sold an easy to replicate commoditized product. NVDA sells a high barrier to entry solution for data centers. NVDA’s valuation is cheap if you believe that accelerating computing will continue. At the current price, NVDA is likely trading at a 30 to 35 P/E for 2024 while growing earnings 100% year over year. When earnings normalize, I suspect NVDA can still grow ~30% on average annually for the rest of the decade. Let that sink in while you watch NVDA become the most valuable company in the world.
Welcome back Cameron! Thanks for the analysis. Can you have a look at ADM and give you opinion on whether the fall is an over reaction or not
Thank you for the video Cameron, I have benen watching you for over 3 years now and I would love to see TCNNF anylysis again. The stock price has gone down since you did the last video, so because of that and whole lot of other reasons I think it is a great buy now.
Great video, Cameron! Thank you! Any thoughts about Nucor (NUE)? Would love to see you do an analysis of this steel giant! Thanks!
Love the channel Cameron - thank you! Would you consider doing analysis of Toyota (TM)? (If I missed it in your videos, would you point me in the right direction?) Thanks!
You are finally back! Loaded some CISCO recently :)) Thanks for analysis. It is awesome as usual
Appreciate you. Thanks for watching and the comment. Feel free to subscribe, it helps the channel
@@CstewartCFA i am your always fan :) learned from you a lot 😊
Thanks Cameron for the idea on Cisco. Love the channel!
What do you think of Deere? Just reported earnings and the market wasn’t impressed. This stock can’t seem to go anywhere!
Exciting times in the crypto world! The latest analysis reveals a bullish trend for Bitcoin in the coming week, especially intriguing following its recent weekly closing patterns. The approval of a Bitcoin ETF adds to the buzz, presenting a prime opportunity for investors to strategize and potentially capitalize on these market movements. Definitely a moment for crypto enthusiasts and investors to watch closely and make informed decisions in this ever-evolving market...managed to grow a nest egg of around 100k to a decent 532k in the space of a few months... I'm especially grateful to Linda Wilburn, whose deep expertise and traditional trading acumen have been invaluable in this challenging, ever-evolving financial landscape.
She's often interacts on Telegrams, using the user-name.
Lindawilburn
HPE and CISCO stock are both undervalued. I own both. I am more bullish on HPE and it was at a much better valuation when I got in under 15
Lets go cameron. Would love to see you do a video on $HITI. Also what investor platforms do you use? Keep up the good work 😎
Thanks! Platform? You mean for research? Mostly our own work and 10ks
Hi, I really like your channel.... I've owned CSCO since 3/23/1999 and it's been a REAL ANCHOR to my Portfolio. I've Only gotten an Annual Yield, including Dividends of: 3.21%. It's a DOG... WOOF !!!!!
Thank for the comment and watching. I greatly appreciate it
Splunk was a way to use that extra cash, not sure how well that will benefit Cisco in the long run. I thought the stock based comp. was on the high side for a company like Cisco but I guess that's normal/average these days.
Do you think it would be worth buying up some NVDS?
The “BIG DATA” and cloud boom lasted a couple years. It would’ve made more sense to buy in 2020, but the good thing is that it is a second order business. Unlike openAI or some other tech companies you can see the failure coming. So… every once a while go to google trends or bing or whatever. And use the key term AI. When the use of the word AI collapses. That’ll be your signal to exit.
The reason you keep getting Nvidia wrong is, you can't name another company that actually has improved its product at the speed Nvidia has. Nvidia increases product performance by 20%+ every generation. For 20 years. Your iphone, Windows, clothes, etc. Have all stayed relatively the same. Nvidia products improve at break neck speed. Because you're not used to a product actually improving, you're thinking the revenue growth isn't sustainable. When Nvidia can no longer push large performance increases, then I'll worry about revenue generation. For now, their customers HAVE to upgrade. If you do animation, and you don't upgrade, it takes you 50 days to render your movie, while the competition takes 40. Not sure why this is hard to understand.
Truth is nobody will know for sure until you can look in hindsight.
Still over valued regardless of what they produce.
This comment makes no sense
I wish I had hopped into NVDA earlier. But I'm not about to hop in now when they have priced in the next decade of earnings and are just running it up because they can.
Buy high sell low lol
They priced into a decade according to who? Your math? Or Pundits? Because last I checked, they have a forward PE of ~30, which is similar to Visa, Fair Isaac, Costco, Netflix, just to name a few. Are those companies also insanely overpriced. Why aren't they getting articles written about them? Unless, people are looking at overpriced, based on a stock chart, and not actual financials....
@@Tential1 Yes. They are also insanely overpriced to absolutely stupid levels. I've seen this before, maybe you haven't. But when the crash comes, it will be very bad. Pricing things 15 to 20 times sales or higher regardless of earnings is a terrible overvaluation. When I see it, I imagine the 90s or other periods of over exuberant investing that went wrong as soon as a wall is hit. Intel and Walmart and other such companies had insane valuations until they hit a wall, then they were reevaluated far, far down even though some of them have higher revenues than NVDA or NFLX or what not. It's happened many, many, many times. Then the revaluation occurs and you get hammered. Same as people bragging about buying META at 90 or 100 when some bought it at 330 plus and aren't even at a double. If you miss a run up and something is insanely valued, avoid it until it crashes again.
@@azulsimmons1040it's not priced at 20 to 40 times sales. And even if it was priced at 20x sales. That's a 40 pe. Nvidia has a 50% profit margin. You're comparing Nvidia to Intel and Walmart which is proving you don't understand the company. Intel and Walmart don't improve their actual product performance by more than 20% a year like Nvidia does. Walmart is just walmart, and then intel, if you followed CPUs you would know that CPU performance has been extremely stagnant which is why Intel couldn't raise prices. This is why you need more than just financial history. I know my financial history, but you can't just use that for Nvidia. You would need to find an example of a company that also increased product performance by 30% annually which most companies don't do, most companies just use their pricing power like Walmart that you mentioned or Intel, back when it bullied us into buying their product, without increasing performance.
@@azulsimmons1040 You prove you just don't know the market. What about Visa? Visa traded at 15 to 20 times sales this last 5 years. Where are your comments on their EXTREME overvaluation? This is why multiples are STUPID to use, without full context. Without knowing the margins and the growth rates, price to sales is meaningless. Visa has a high profit margin, so we don't worry about a high price to sales. Same with NVidia. Nvidia has a higher price to sales than Visa. Double. But Double the growth rate.
I'd love to say Nvidia is fairly valued, but well, I know the next product rumors already. That's another 40% price hike. But hey, some people can't just pull up Nvidia historical Price to Sales, Profit Margins, Growth rates, all in one chart on their terminal, and see just how silly they're being. I can.... But if you can simply name another company that increases their product performance by more than 20% a year, then I'll listen. Product performance. And if you can articulate why increasing product performance by a measurable 20%, isn't worth more money, when it saves a person who is paid 250k - 5 million+ a year, hours of time rendering, running models, etc. Then I'll doubt Nvidia.
Net income up 500% yoy... Maybe, the trailing numbers are being heavily influenced by something.... Maybe a change over in manufacturing line from tsmc... Nah, why look for a reason. Just scream overpriced without looking into it any further. Makes sense.
I think the biggest headwind for NVIDIA will be if they can keep up the orders. Historically its a cyclical boom and bust industry. In a year or two will the hyper scalers still be double ordering. Will the ever bottom line chasing enterprises be looking to good enough solutions that are cheaper (amd, intel, etc), and will their edge be so absolute that no one will invent a better mousetrap? All unknowns, some with higher probabilities than others.
Oh and don't forget unrest in the TSMC region could also be a headwind. Just some things to think about as nothing is perfect.
TXRH
Texas Roadhouse
This won't end well.
yea the ROC of CSCO is amazing even though the earnings yield is meh... which means its definitely UNDERLOOKED... I own the stock and am waiting to buy more if the price comes down but at this pace the cashflow going to ROC the upside seems stronger. Thats the thing with businesses reinvesting in themselves they suddenly spike up after the yields go up ...And then the stupid analysts have to change their price targets chasing after the stock price and earnings LOL
what is a good price to buy, in your opinion?
Hi Stewart
Thank you for the analysis and idea - indeed a reasonably priced business in the market.
Could you please analyze one of the semiconductor equipment manufacturers? They have enjoyed tremendous growth over the last few years, and a company that's interesting in particular is KLAC:
PROs
1) Gross margin ~60-65% which is significantly higher than peers - AMAT, LRCX, ASML, TEL
2) Operating margin ~40% - also higher than peers, and pretty impressive margin in B2B
3) Semiconductor market expected to grow to ~1T by 2030, with equipment manufacturers historically enjoying 14-16% of the pie. With that said, KLAC, having ~12% share of that piece, the projected revenue could be ~18B. With the same margin that translates into ~7B FCF.
4) Consistent history of the share buybacks
5) Sticky service business segment to get thru down-cycle
CONs:
1) With current FCF being 3-4B, the company comes at a rather rich valuation
2) Semiconductor equipment business is still inherently cyclical
3) The higher margins compared to peers are derived from KLAC being indispensable in process control. This is a strength but can also be a weakness if disrupted by competition
What are your thoughts on current entry point price and long term returns? What are your thoughts on the position compared to peers?
Cisco was a unique case. I HATE finance people bringing up Cisco. You can't just analyze a company based on numbers you have to actually know the product. It's something people in finance gloss over. Finance people made a huge mistake about Cisco's product and they thought that people were going to need to upgrade it regularly. That is not the same as Nvidia. Nvidia has a 30-year track record so we know how the company works and we know that you have to upgrade that product every two years. It's such a vastly different circumstance. Having a finance degree is not enough anymore. You really need a tech degree as well because too many things rely on Tech if you don't know Tech then you can't analyze the majority of companies today
I think the main point he was trying to make is regarding the bubble around AI and companies trading for v disproportionately high multiples, ie to be vigilant and not end up like people who tied capital into Cisco during that period in which they have not seen any returns since. But yes you do need to try understand the business to the best of your ability.
Thanks for the comment. I agree on the tech knowledge is key here. I'm just saying I think most of that future revenue is already represented in the price you are paying. At some point the stock is just too expensive.
Well said
I dont specialize in tech but I'd agree with this guy about the bubble, some of the valuations are just insane and you font need to be a CFA to figure it out
@@CstewartCFA bro, just look at its forward PE of 30, and understand that most of nvidia's revenue come from magnificent 7, which are the richest mofos. they have to keep buying nvidia hardwares to not lose the AI race. Let that sink in, and now tell me if you still think its price is too high?
Like I told you before. Nvidia is not cisco. Looks like Nvidia did it again.. What a surprise. Only 20+ years of 20%+ net income growth average.... I guess you guys just don't have full company history. Get a better financial data provider.
Milk
Nvidia is clearly way overvalued, with an absurd price. I'd buy instead Cisco, Texas Instruments and other chip/tech stocks at fair or low value. Long investor not trader.
22% Revenue growth qoq. 265% year over year. 2021 was a good year, but 2022, they switched processes, and that means they couldn't sell. So 2022 was a throwaway year. Yet, the trailing multiple was based on that... now, the revenue and profit normalized... This is what happens when you don't understand a company, you think its overvalued when it isnt. One more quarter, and Nvidia trailing numbers will be normalized.
I understad but I don't buy this kind of companies with very high multiples anyway @@Tential1
Nvidia has had a forward pe of 30, for over 20 years... And had no problem delivering..... None of you noticed, because it was lame video games. Now you notice, when they add ai. Costco, fair Isaac, netflix, all have higher pes... With slower growth rates... Yet those companies NEVER get mentioned. No, let's think a company averaging 25% net income cagr over any 7 year period, there the over valued company...
Super micro computer makes nvidia look like peanuts market is such a clown show in these stupid ai stocks I honestly hope all these nvidia and smc people lose all there money.
So, 22% Revenue growth quarter over quarter. 265% year over year.... Maybe, just maybe, you were looking at trailing year over year numbers, like backward looking PE and not understanding that last year was a cyclical off year for Nvidia? They have years, like last year, where they switch product lines. Now, the swith is done, and the revenue is up 265% year over year.... So maybe, just maybe, Nvidia stock didn't rocketship up because of an AI bubble, it rocket shipped up because people realized, they were using trailing numbers. You do realize, if you actually go back an additional year, it smoothes everything out? 2021 was fine, 2022 was a retool, and 2023 now has insane growth, but in reality, if you just grow it from 2021, it's not huge at all... Again, learn the company, instead of seeing a line go up and think it's a bubble everytime.
@Tential1 they are selling previous years inventory tool, you do realize the market prices on the growth if you think this isn't a cycle that will be over in a year wow you must not know how numbers work do you think 265% year over year every year rofl. They make less per quarter then a old fashion oil company xom or vw oh better bust your nut over that rofl. Learn how numbers work sorry but numbers as get bigger don't continue to go up 265% per year I'm sorry for your lack of intelligence
Look at stocks, using a 3 or 5 year forward instead.... Nvidia isn't remotely expensive.
From your comments, I think you are emotionally invested in NVDA and aren’t thinking rationally
Look what happened to PYPL when an expectation of forward 3Y 30% Cagr was decreased to 10%. It’s not expensive untill the forecast holds
@@RyBrownso... Earnings Was I wrong? I'm not emotionally invested. I was you... For 15 freaking years. Then, I decided to actually look at my terminal, instead of just crying about the pe. 20% annual revenue growth. 25% net income growth. Off a video game product. Now, the product is necessary for ai and you expect less growth? Dude I was delusional for 15 years, I'm hoping that you don't have to be the same level of delusion I was. Just look it up on your terminal. Plot the growth.... It's impossible to ignore. Then, I know the products intimately.
@@YellowBelkoPayPal is a business that doesn't have a product that they released that increases performance by 40% which forces you to upgrade. That is what Nvidia does regularly, and you would know that if you had followed the company for over 20 years. However you're doing the analysis based on only knowing the financials, and not having a firm understanding of the business. I used to do what you did. I did it for 15 years on Nvidia, and I KNEW THE BUSINESS. It was only when I actually decided to do the numbers based on the product and not just random financial projections. I went back, and read every review of product they did, and charted the performance and price increases. Dude, I don't leave the house. This is all I do. If you want to find gems like Nvidia and not live in poverty you can't have a life.... you should not do this. All I do is financial analysis, and talk with managers, and read reports. And for semiconductors, I know where the rumors are publicly listed to model out. Like I already have Nvidia doing another 25-40% price increase. Rumors are, 40% performance increase on the next product, and that's another insane price hike. I remember being a kid, upset I couldn't afford their high end products. 500 was overkill... Now... They did 1500, then decided, after launch, to raise the price to 2000. Apple gets a 30 pe, no revenue growth, and 1500 phone, but Nvidia, 20%+ revenue growth, their product actually increases performance, unlike Apple, and you doubt their future. Lol. I get it though, this isn't your field. If I asked you your field, you'd make me look stupid. Semiconductors are literally my favorite subject. I can talk to you about a new chip all day long...
@@RyBrownIt's a subject that uniquely pisses me off, because when people make comments about NVidia, they do it without putting the data up on screen. There is nothing in the world that pisses me off more than someone talking about xyz company, and they don't immediately pull the company up, and show me the revenues, etc. And explain why they believe it's wrong, bad, etc. He only looked at the stock chart. Cool. Why don't you show Revenues, Net Income, Margins, and product performance? You accept other companies doing 15% Revenue growth on just pricing power. Walmart does revenue growth on pricing power and volume. And you don't question that. But NVidia is the only company in the world, that improves its actual product by a measurable 20% a generation. Your car, house, phone, etc. nothing improves at that rate. So let's plot all of that up first, and then ask if the current forward PE of 30, is overpriced, when Netflix, Fair Isaac, Costco, etc. all have similar forward PEs, with HALF the revenue and net income growth, Netflix does not improve the product 15-20% a year, but you'll accept those revenue increase from Netflix. But Nvidia saves an engineer thats paid 250k - a couple million a year, hours of time, and increases performance 20% a generation, and that's the growth you're doubting. Notice, I'm not even mentioning AI, this growth was normal BEFORE AI. And even the way you talk about AI, is not the future of AI. I don't understand the hype around generative AI, that is NOT the future of AI. That's a very tiny part of AI, and already is headway for the next 10 years. The AI products we have currently don't even work properly, because we need faster chips.
This was similar to Tesla, right before they built their first factory. First factory allowed 1 million units, but people were pricing the stock based on the current expenses, but the current expenses INCLUDED THE FACTORY! So, obviously once the factory was running and they actually got profit from said factory, things would normalize. People are just bad at normalizing financials. Nvidia has the same issue. They had a normal 2021, a bad 2022 as it's a cyclical business and they need tsmc to be ready, and once tsmc was ready, 2023 was good. But now, you have bad trailing numbers because of 2022, so people think 2023 is some fluke. If you're not lazy, just do 2023 over 2021, or use the 2012 trailing PE if you're lazy. And it's fine. 2022 is just a throw away year, and Nvidia has a throw away year every 5 years or so, based on whether TSMC is ready to release the next product.
Absolutely clueless take on nvidia. The AI revolution is going to melt your face over the next 5 years. What you need to understand is that nvidia have a 95% market share in the chips that enable AI and no one else is situated to meaningfully compete in the foreseeable future. Betting on nvidia = betting on AI.
And you quote trailing sales figures to start, it's like you're trying to troll me. You know full well, Nvidia is cyclical, you have a terminal, you can see 20+ years of data... Nvidia has throw away years, due to switch overs in manufacturing from tsmc. Last year was a switch over year. Trailing numbers are useless. Why do you do this? Why not just learn the company.....
Cool.. so nvidia has gotta make real the absolute rainbow projections that everyone has taken into account without few hiccups. How likely is that? How likely is a person or a company to succeed without any trouble and according to their, not ordinary but shiny rosy plans
If you wanna project infinite growth into the future you're always going to see these companies as fairly valued like every other overhyped lunatic. If you understood the channel you'd recognize the goal when valuing a company is to aim for a conservative forecast. Not a madman's projection of incessant optimism. Have fun on your rocket ride though! Just be wary when the rocket fuel tanks.
@@nonexistent5030When the fuel tanks what? What happens to the fuel tanks???
JK, I concur.
@@hodokwajaearnings today... See? Dude, I've followed the company for 20 years now. Asked how they can keep it up. Problem is, I was a victim of the 20% annual revenue increase Nvidia does. I used to play video games. I used to use their products, until, I got so obsessed, I followed the financials and how they were made. Semiconductors are what got me into finance. And Nvidia, they aren't randomly increasing price. They increase performance by 20%+. This means, if you don't upgrade, as a business, your competitors produce product faster. Take animating a movie, if I want to animate a movie it might take me a hundred days to generate the movie. If I upgrade to the latest Nvidia products though it'll only take me 60 days. If I don't upgrade, a competing Studio can put out more movies or do more revisions. Nvidia does this to you, every time. It's been so long of this excellence, I got tired of fighting Jensen. You're new to this. I understand it. But this, it isn't new. You're just new to it. It's been happening for 20 years.
@@hodokwajaalso, they did that growth, off of product where a huge chunk of the revenue was from video game players. So 20% Revenue growth, on a non essential product. Now, they have Microsoft, Google, Amazon as customers, and you now doubt they can continue the 20% Revenue growth when the product they sell is no longer something for fun, but a critical data center component...
Again, I understand. This seems insane if I was you, and I hadn't dealt with Nvidia ever, I'd say it's insane too. But I've been at this for long enough, seen Nvidia do back to back 100% Revenue growth years, I've long given up hoping someone catches up. 5 years ago, I gave up, and bought the stock. I gave up cheering for nvidia competition. I still follow them, I still hope amd or Intel catch up, and give people options. But well, it's been 20 years.... Time to just join the winning team.