Skip to Content
Stock Analyst Update

Cisco’s Q3 Indicates Recovery; FVE Up to $50

We are raising our fair value estimate for narrow-moat Cisco to $50 per share from $48, and view shares as fairly valued.


We are raising our fair value estimate for narrow-moat Cisco (CSCO) to $50 per share from $48 and view the shares as fairly valued. Drivers of our increase include Cisco benefiting from organizations modernizing their networks for digital transformations and hybrid work environments, the ramp of Wi-Fi 6 and campus switching upgrades, security and networking converging, and the early adoption of 400 Gb data center switching, 5G solutions, and edge networking. We believe Cisco is well positioned to capitalize on the broad-based strong demand it is seeing across various industries and geographies as economies reopen.

Year-over-year revenue growth of 7% for the fiscal third quarter topped our expectations. Cisco is experiencing a strong spending environment due to pandemic-related restrictions being alleviated, as total product orders increased by 10% year over year. However, supply chain-related issues with procuring materials limited overall growth, and Cisco expects these issues to persist for the remainder of 2021. We believe Cisco has taken prudent actions to ensure it can meet customer delivery requirements, and we expect any moderate gross margin compression to be ephemeral. With a strong bounceback in orders and backlog, we believe Cisco is taking the right approach in investing in potential high-growth avenues for the coming quarters to take advantage of spending recovering.

Revenue with infrastructure platforms grew by 6%, applications expanded by 5%, security grew by 13%, and services increased by 8%, all year over year. Switching strength was seen in the data center, with 400 Gb ramps starting, and campus products being upgraded alongside the strong results from wireless. Routing performed well as service provider demand is ramping with 5G upgrades. Webex led the applications business, followed by growth in unified communications and AppDynamics. Security had broad-based growth, with highlights including cloud security led by Duo, Umbrella, and SecureX.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Mark Cash does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.