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Cisco Systems Inc CSCO

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Cisco’s Investor Day Reaffirms Software and Recurring Revenue Push; Raising FVE to $54

Mark Cash Senior Equity Analyst

Analyst Note

| Mark Cash |

We are raising our fair value estimate for narrow-moat Cisco Systems to $54 per share from $52 after its 2021 investor day laid a robust growth trajectory. Cisco’s expectations of a compounded annual growth rate of 5%-7% through fiscal 2025 was higher than we anticipated. However, forecast adjusted earnings growth through fiscal 2025 matched the revenue growth target, which was lower than we expected. We believe that Cisco is a solid operator and expect that the growing proportion of software subscriptions and recurring revenue can help drive the bottom line at a faster rate than revenue over the longer term, helping drive our fair value increase. We consider shares modestly overvalued but believe Cisco is executing on its transformation to become more predictable and less susceptible to potential IT spending lulls.

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Company Profile

Business Description

Cisco Systems, Inc. is the world's largest hardware and software supplier within the networking solutions sector. The infrastructure platforms group includes hardware and software products for switching, routing, data center, and wireless applications. Its applications portfolio contains collaboration, analytics, and Internet of Things products. The security segment contains Cisco's firewall and software-defined security products. Services are Cisco's technical support and advanced services offerings. The company’s wide array of hardware is complemented with solutions for software-defined networking, analytics, and intent-based networking. In collaboration with Cisco's initiative on growing software and services, its revenue model is focused on increasing subscriptions and recurring sales.

Contact
170 West Tasman Drive
San Jose, CA, 95134-1706
T +1 408 526-4000
Sector Technology
Industry Communication Equipment
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jul 31, 2022
Stock Type Cyclical
Employees 79,500

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