Cisco Systems (CSCO -1.75%) is the dominant provider of enterprise networking hardware. Its customer base skews big – think large companies, organizations, service providers, and government agencies.

When faced with uncertainty, those large customers often pause or pull back on spending. Cisco takes a hit when the economic outlook is fuzzy, and it was about as fuzzy as it could be during the pandemic. At the worst point last year, Cisco was seeing revenue declines of nearly 10% on a year-over-year basis. The company's other businesses, like video conferencing service WebEx, couldn't offset tumbling demand for networking hardware.

Things are now starting to look up for Cisco. Revenue soared 7% in Cisco's fiscal third quarter, and the company called for similar growth in the fourth quarter. The downturn for Cisco appears to be over.

A hand drawing a rising chart.

Image source: Getty Images.

The path to $100 per share

It's normal for Cisco to experience strong growth coming out of a downturn, but this cycle could be exceptionally good for the tech giant. Evercore ISI analyst Amit Daryanani believes that spending on networking could accelerate coming out of the pandemic, driven by an improving IT environment and adoption of technologies including 5G, Wi-Fi 6, and 400 gigabit Ethernet.

Barron's reported on Monday that Daryanani boosted his price target on Cisco stock from $58 to $62. However, the analyst sees the stock eventually hitting $100 per share as the company benefits from a return to offices, its growing presence in public cloud infrastructure, and the growth of the hybrid cloud market.

Daryanani expects the commodity cost picture to improve for Cisco in the near-term, which will help the bottom line. Coupled with accelerating revenue growth as workers return to offices, the analyst thinks Cisco will enjoy a strong recovery in the post-pandemic period. He expects Cisco to be able to grow revenue by a mid-single-digit percentage without the help of acquisitions, and he said that the company's free cash flow generation was underappreciated.

The average analyst estimate for Cisco's adjusted earnings per share for fiscal 2021 is $3.20, putting the price-to-earnings ratio at 16.5. At a share price of $100, the price-to-earnings ratio would be closer to 31.

That wouldn't be outrageous in today's pricey stock market, but Cisco will likely need to post some solid earnings growth to make a $100 stock price a reality in the coming years. Cisco's ongoing push toward software, recurring revenue, and subscriptions should help the cause.

Cisco is still primarily a hardware company, but the high-margin software business is growing quickly. Cisco produced $3.8 billion of software revenue in the latest quarter, up 13% year over year and accounting for nearly 30% of total revenue. Over 80% of that software revenue comes from subscriptions, giving Cisco a steady stream of reliable revenue. Cisco's software business is now at an annual run rate of $14 billion.

The shift toward software can help Cisco drive earnings growth at a higher rate than revenue growth. If Daryanani is right about Cisco's post-pandemic outlook, high single-digit earnings-per-share growth is a possibility.

Even if Daryanani turns out to be overly optimistic, Cisco stock isn't particularly expensive right now given the company's dominance in its core markets. Tech stocks in general are pricey, so Cisco could be a good way to invest in tech without paying an obscene price to do so.

While no one can predict what Cisco stock will do in the next few years, a $100 stock price is certainly not out of the question if things go right for the networking hardware company.