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Arista Networks (ANET - Free Report) is a Zacks Rank #1 (Strong Buy) that develops markets, and sells cloud networking solutions globally. The company offers cloud networking solutions that consist of extensible operating systems, a set of network applications, as well as gigabit Ethernet switching and routing platforms.
The stock struggled for most of the year as many tech stocks have in 2022. However, unlike others in the tech space, Arista continues to outperform on earnings.
Recently, the company proved its earnings momentum once again, helping the stock spike above its summer highs. Now ANET is only down only 13% from all-time highs. Relatively speaking, investors should be happy with this performance and looking to the year ahead, we should see the stock post new highs.
More about ANET
The company incorporated in 2004 and is headquartered in Santa Clara, California. It employs about 3,000 people and has a market cap of $39 billion. The company went public in June 2014 and currently has more than 7,000 cloud customers worldwide.
Impressive Earnings Momentum
The relative strength in the stock should not be ignored. There are a handful of well-known tech stocks down over 70% this year. The reason for this has been overvalued names that do not live up to earnings expectations.
For Arista, the stock has beaten the Nasdaq this year for two reasons:
First, the valuation is not inflated, with the Forward PE at 30. Because of this, the stock has not been shorted and sold as hard as other tech names with lofty valuations.
Second, the company continues to beat on earnings, not once missing EPS since going public.
Looking at their most recent quarter, Q3 came in with a 19% EPS beat. ANET reported $1.25 v the $1.05 expected and revenues came in at $1.18B v the $1.06B expected.
Arista also guided Q4 higher, now seeing a range of $1.18-1.20B v the $1.10B expected. Gross margins were lower year over year, but operating margins came in above last years.
Estimates Rising
Analysts were impressed with the quarter and have taken their numbers higher across all time frames.
Since earnings, current quarter estimates have gone from $1.07 to $1.19, or 11% higher. Expectations for next quarter have been lifted as well, with estimates going up by 16%.
Looking down the road, the numbers continue to tick higher. For the current year, we have seen estimates go from $4.04 to $4.33 over the last month. This 7% bump higher is impressive, but nothing compared to the 12% spike in estimates that Arista is seeing for next year.
After earnings, a handful of analysts also lifted their price targets. Citi reiterate ANET with a Buy and $190 target, up from $170. Morgan Stanley lifted to $130 from $115 and kept its equal weight. Barclays has an Overweight and a $143 target, which they lifted from $131.
The Technical Take
The stock made all-time highs at $148.57 late last year. Over the summer, when markets were very weak, the stock bottomed at $89.12. Since then, two earnings beats have helped the stock come up over 40% off those 2022 lows.
So now, investors should be looking to find entries into this stock as the overall market stabilizes.
The low made this summer, happened to be the 50% retracement made from COVID lows to all-time highs. If we are targeting the -23.6% Fibonacci level, this gives us targets at $174 or 35% higher from the current price.
While its hard to chase after a big move higher, investors can wait for pullbacks and look at moving averages. For ANET, the 21-day ,50-day, and 200-day moving averages are all in the same area, between the $115 and $118 levels. That area should be a massive support zone where investors can enter.
In Summary
In bear markets, stocks showing relative strength should not be ignored. They are strong for a reason and when markets turn, they can be outperformers for the next trading year and beyond.
Investors should watch this one closely and look to enter on pullbacks. The stock should hold up well the rest of the year and look to take out all-time highs in 2023.
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Bull of the Day: Arista Networks (ANET)
Arista Networks (ANET - Free Report) is a Zacks Rank #1 (Strong Buy) that develops markets, and sells cloud networking solutions globally. The company offers cloud networking solutions that consist of extensible operating systems, a set of network applications, as well as gigabit Ethernet switching and routing platforms.
The stock struggled for most of the year as many tech stocks have in 2022. However, unlike others in the tech space, Arista continues to outperform on earnings.
Recently, the company proved its earnings momentum once again, helping the stock spike above its summer highs. Now ANET is only down only 13% from all-time highs. Relatively speaking, investors should be happy with this performance and looking to the year ahead, we should see the stock post new highs.
More about ANET
The company incorporated in 2004 and is headquartered in Santa Clara, California. It employs about 3,000 people and has a market cap of $39 billion. The company went public in June 2014 and currently has more than 7,000 cloud customers worldwide.
Impressive Earnings Momentum
The relative strength in the stock should not be ignored. There are a handful of well-known tech stocks down over 70% this year. The reason for this has been overvalued names that do not live up to earnings expectations.
For Arista, the stock has beaten the Nasdaq this year for two reasons:
First, the valuation is not inflated, with the Forward PE at 30. Because of this, the stock has not been shorted and sold as hard as other tech names with lofty valuations.
Second, the company continues to beat on earnings, not once missing EPS since going public.
Looking at their most recent quarter, Q3 came in with a 19% EPS beat. ANET reported $1.25 v the $1.05 expected and revenues came in at $1.18B v the $1.06B expected.
Arista also guided Q4 higher, now seeing a range of $1.18-1.20B v the $1.10B expected. Gross margins were lower year over year, but operating margins came in above last years.
Estimates Rising
Analysts were impressed with the quarter and have taken their numbers higher across all time frames.
Since earnings, current quarter estimates have gone from $1.07 to $1.19, or 11% higher. Expectations for next quarter have been lifted as well, with estimates going up by 16%.
Looking down the road, the numbers continue to tick higher. For the current year, we have seen estimates go from $4.04 to $4.33 over the last month. This 7% bump higher is impressive, but nothing compared to the 12% spike in estimates that Arista is seeing for next year.
After earnings, a handful of analysts also lifted their price targets. Citi reiterate ANET with a Buy and $190 target, up from $170. Morgan Stanley lifted to $130 from $115 and kept its equal weight. Barclays has an Overweight and a $143 target, which they lifted from $131.
The Technical Take
The stock made all-time highs at $148.57 late last year. Over the summer, when markets were very weak, the stock bottomed at $89.12. Since then, two earnings beats have helped the stock come up over 40% off those 2022 lows.
So now, investors should be looking to find entries into this stock as the overall market stabilizes.
The low made this summer, happened to be the 50% retracement made from COVID lows to all-time highs. If we are targeting the -23.6% Fibonacci level, this gives us targets at $174 or 35% higher from the current price.
While its hard to chase after a big move higher, investors can wait for pullbacks and look at moving averages. For ANET, the 21-day ,50-day, and 200-day moving averages are all in the same area, between the $115 and $118 levels. That area should be a massive support zone where investors can enter.
In Summary
In bear markets, stocks showing relative strength should not be ignored. They are strong for a reason and when markets turn, they can be outperformers for the next trading year and beyond.
Investors should watch this one closely and look to enter on pullbacks. The stock should hold up well the rest of the year and look to take out all-time highs in 2023.