Cisco’s Superb Fiscal 2023 Reflects Networking Strength, and Investors Still Have a Chance to Buy

We raise our fair value estimate for Cisco Systems to $56 per share from $54, following a strong fiscal second quarter and terrific guidance for the remainder of the year. We view Cisco’s impressive guidance as reflecting both an improving supply environment and durably strong demand. Enterprise networking spending appears resilient to us against a backdrop of softening end markets elsewhere. We believe strong results so far in fiscal 2023 and strong guidance for the future, lends credence to our long-term view that Cisco remains the pre-eminent heavyweight in enterprise networking. We see its moaty, holistic portfolio eliciting high switching costs for customers and prompting upselling, which could even allow it to claw back market share from competitors. Shares initially jumped 7% afterhours in response to guidance, but gave back some gains as we think investors grew skittish of the durability of growth. Though we see backlog drawdown as contributing to near-term growth, we view networking demand as strong into the long term. With shares trading around $50, we still see value for long-term investors.