Arista Networks
Arista Networks
ANET
1.33%
2%
- ANET stock in consolidation pattern with buy point of 133.80
- Recent action part of larger consolidation dating back to late December
- Four quarters of accelerating EPS and revenue growth
Industry Group Ranking
Emerging Pattern
Consolidation
A sideways pattern that doesn’t fit traditional base definitions. Sometimes will have a handle.
Arista Networks (ANET) is the IBD Stock Of The Day as shares of the computer networking gear maker became actionable. Also, IBD added ANET stock to its SwingTrader and Leaderboard platforms on Monday.
XOn the stock market today, ANET stock rose 2.1% to 131.20. Earlier in the session, it climbed as high as 134.61 before pulling back.
Arista stock has outperformed rival Cisco Systems (CSCO) and the S&P 500 in 2022. ANET stock has retreated 8.7% this year amid volatility in the Nasdaq composite. But CSCO stock has dived 29.4%. And the S&P 500 is down 17% as of Monday's close. Earnings for CSCO stock are due after the market close on Wednesday.
ANET Stock: Facebook Is Big Customer
Arista's biggest growth driver has been network switches that speed up communications among racks of computer servers packed into data centers. Two of its biggest customers are Facebook parent Meta Platforms (META) and Microsoft (MSFT).
ANET stock has traded up in many high-volume days in the past few weeks, a bullish sign. On Oct. 31, the company reported third-quarter earnings and revenue that handily beat analyst estimates.
Arista also hosted an analyst day on Nov. 3 at which management projected 2023 sales growth of 23% vs. estimates of 16%.
Large orders from Meta Platforms are expected to continue. Meta Platforms has projected 2023 capital spending of $34 billion to $37 billion, up from an estimated $32 billion to $33 billion this year.
ANET stock holds an entry point of 133.80. The stock has consolidated since hitting a new high on Aug. 18. In addition, there's a long consolidation going back to the end of 2021. Either way, the stock has formed a handle.
Amid the Nasdaq's volatility, ANET stock hit a 52-week low of 89.12 on June 16 before trending higher. It fell to a recent low of 98.20 on Oct. 13.
Arista Stock: Growth To Slow In 2024?
The company completed a 4-for-1 stock split about a year ago and announced a $1 billion stock buyback program.
Arista Networks has posted four quarters of accelerating EPS and revenue growth. Analysts with a bearish view expect growth to decelerate sharply in 2024.
Microsoft and Facebook operate so-called "hyperscale" data centers. They're designed to ratchet up computing horsepower when demand surges.
Arista sells switches that speed up communications among racks of computer servers packed into data centers. One view is that while Arista has dominated in the hyperscale market, Cisco will gain share in 2023 and 2024.
Computer Network Group Ranks Ninth
Even if that happens, however, Arista is gaining ground in the so-called "enterprise" market — large companies, government agencies and educational institutions.
IBD's Computer Networking industry group ranks ninth out of 197 groups that IBD tracks.
Meanwhile, the Relative Strength Rating of Arista stock is 86 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS rating of 80 or better.
The company holds a tiptop IBD Composite Rating of 99.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
ANET Stock: Institutional Ownership Strong
ANET stock owns an Accumulation/Distribution Rating of only B-. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
The rating, on a scale of A+ to E, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Arista has been the primary supplier of 100-gigabit network switches to internet companies. A new battle looms as internet companies upgrade to 400-gigabit networks from 100G technology.
Arista's largest acquisition was Big Switch Networks in 2020.
Two ANET stock acquisitions — Mojo Networks in 2018 and Awake Security in 2020 — targeted the enterprise market. Mojo Networks makes gear for wireless local-area networks. Awake Security uses artificial-intelligence software to monitor computer networks for hacker activity.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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