Cisco Earnings: Demand Coming Down to Earth but Still Healthy, in Our View, As We Maintain $56 FVE

We maintain our $56 fair value estimate for shares of wide-moat Cisco Systems after it topped its fiscal fourth-quarter guidance and provided an outlook for modest growth in fiscal 2024. Underlying demand for Cisco’s core networking products is coming down to earth from record levels seen during fiscal 2022, but remains at a healthy level, in our view. A large order backlog helped Cisco to achieve supernormal growth in fiscal 2023, but we think fundamental demand can fuel stable growth into the long term after the backlog returns to normal levels in fiscal 2024. We continue to see Cisco as a dominant force in enterprise networking, with highly sticky solutions that retain customers and underpin our wide moat rating. We see shares as fairly valued.