Another Record Quarter for Cisco, Shares Fairly Valued
The narrow-moat firm showed strength across all business segments and provided strong guidance for next quarter.
Cisco's (CSCO) first-quarter results modestly beat our top line and net income expectations while the $0.77 earnings per share exceeded our expected result due to an increased quantity of shares repurchased.
The narrow-moat firm posted 8% year-over-year revenue growth, with strength across all the business segments and provided strong guidance for the next quarter. After updating our Cisco forecast to consider stronger growth driven by expected cross selling of multi-cloud environment products, security solutions, and infrastructure hardware, we are raising our fair value estimate to $46 per share from $43.
With shares trading around our fair value estimate, we recommend for investors to sustain their Cisco positions.
The company guided the second quarter to have a 5%-7% growth over the previous year with 30.5%-31.5% non-GAAP operating margins. Cisco is benefitting from a strong IT spending environment, and we believe that the company's product roadmap has made the it a one-stop-shop for networking environments. Two major recent announcements by Cisco were its integration of security into SD-WAN products and its offering of production grade Kubernetes to be run on premises and then offloaded to Amazon AWS.
We like that Cisco is intertwining previously siloed offerings into combined solutions that contain unique selling features. Additionally, having support with all three major hyperscale public cloud providers allows Cisco to be a commonality for IT teams balancing on-premises, private, and public cloud environments. We like that Cisco has completely embraced the cloud as a path to growth instead of a business threat. In our view, Cisco's innovative product portfolio should keep it on the shortlist for enterprise customers debating networking infrastructure providers for hardware, software, and services in cloud environments or on premises.
|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 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:
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.