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Cisco Systems Inc CSCO

Rating as of

Morningstar’s Analysis

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Economic Moat


Capital Allocation


Product Orders Return to Positive Year-Over-Year Growth in Cisco’s Q2; Maintaining $48 FVE

Mark Cash Senior Equity Analyst

Analyst Note

| Mark Cash |

Narrow-moat Cisco Systems performed well in the second quarter in our view, with revenue of $12 billion remaining flat year-over-year and adjusted earnings of $0.79 increasing by $0.02 annually. Total product orders increased by 1% year over year after posting five sequential quarters of contractions, and all major product segments saw improved annual growth rates. We believe that Cisco is navigating the pandemic well by finding pockets of strength while efficiently managing costs. Cisco sees encouraging signs of recovery across its customer verticals and expects to return to growth in the third fiscal quarter. We view Cisco’s quarterly dividend increasing by $0.01 to $0.37 in April as a sign of balance sheet and cash flow confidence. Cisco is aptly positioned as organizations upgrade their IT infrastructures and will prudently exhibit cost controls for a resilient operating profile, in our view. We are maintaining our $48 fair value estimate and see shares as fairly valued.

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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.

170 West Tasman Drive
San Jose, CA, 95134-1706
T +1 408 526-4000
Sector Technology
Industry Communication Equipment
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jul 25, 2021
Stock Type Cyclical
Employees 77,500