Cisco Ends Q2 With Record Backlog Amid a Robust Networking Demand Environment; Raising FVE to $56

We are raising our fair value estimate for narrow-moat Cisco Systems to $56 per share from $54 after its second-quarter revenue growth and earnings came in slightly higher than our expectations. Our increase is driven by expecting a marginally higher long-term growth profile as Cisco transitions toward more software and subscription sales. Cisco's shares, which rose slightly in afterhours trading, are fairly valued, in our view. We think Cisco is aptly positioned to benefit from organizations requiring networking and security upgrades to facilitate hybrid working and cloud architectures, but expect normalized demand to eventually slow the robust revenue growth currently being experienced. Cisco continues to be a firm we consider shareholder-centric and a solid operator, and we view its decision to up its quarterly dividend and greatly increase its buyback authorization positively.