What 3 Of Wall Street's Best Are Saying About Arista Networks

Shares of Arista Networks Inc ANET jumped 5 percent in after-hours trading on Thursday, February 19 after the company beat analysts’ expectations for the fourth quarter of 2014 and forecasted higher revenue for the current quarter.

Highlights from the report include GAAP earnings of $0.43 per share, exceeding analysts’ estimates of $0.32 and increasing 87 percent year-over-year. The company also beat analysts’ revenue consensus of $166.77 million, posting a total of $173.51 million in revenue and marking a 51 percent increase from the same quarter a year prior. Revenue for the full fiscal year of 2014 came in at $584.1 million, representing a 61.7 percent year-over-year increase.

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Jayshree Ullal, Arista President and CEO, stated “We are pleased with our annual revenue growth in 2014 of 61.7 percent over 2013, with broad customer momentum across our key verticals…Our pioneering innovations in EOS+, in combination with our flagship 7000 series spine and spline models have made cloud networking transition a reality.”

Arista Networks has forecasted revenue for the first quarter of 2015 to range between $164-172 million, while analysts expect $165.95 million. Analysts also expect the company to post earnings of $34 per share.

Arista Network’s stellar fourth quarter came as a surprise to analysts and investors alike who believed the company’s legal expenses from its lawsuit with Cisco Systems, Inc. CSCO would take a toll on its profits. In December 2014, Cisco Systems announced plans to file two lawsuits against Arista Networks for copyright infringement and violating 14 patents. Cisco claimed that Arista even egregiously plagiarized user manuals, down to the last grammatical error.

A handful of analysts’ weighed in on Arista Networks on February 19th following the company’s Q4 results with ratings all across the board.

Credit Suisse analyst Kulbinder Garcha reiterated an Outperform rating on Arista Networks with a $90 price target, highlighting the company’s growth opportunity potential “in the IT Hardware and Networking landscape.” In addition, the analyst listed three reasons Arista has a competitive edge: “(1) it allows the company to ride the commodity curve and Moore’s Law; (2) it provides customers the agility needed for today’s networking environments; and (3) it makes the TCO price competitive by enabling not only lower capex but opex as well.” Garcha concluded “These factors should drive share gains, which are supported by Arista’s strong and broadening customer traction …”

Overall, Kulbinder Garcha has a 50 percent success rate recommending stocks and a +8.5 percent average return per recommendation.

On the other hand, Goldman Sachs analyst Simona Jankowski reiterated a Neutral rating on Arista Networks, but raised her price target from $69 to $75. She noted, “Given record short interest heading into the print (7 percent of shares short), we are not surprised by the sharp move higher, though we remain Neutral due to the valuation and risks.”

Simona Jankowski has an overall success rate of 63 percent recommending stocks and a +13.8 percent average return per recommendation.

Similarly, Raymond James analyst Simon Leopold reiterated a Market Perform rating on Arista Networks but did not issue a price target. He noted: “We suspect sentiment had turned more cautious ahead of the report with worry fueled by Cisco’s lawsuit and white box competition, neither of which seems to be affecting sales. With higher estimates and a pull back from the highs, we see the shares fairly valued with a 2016 PEG of 1.9x.”

Overall, Simon Leopold has a 67 percent success rate recommending stocks and a +9.4 percent average return per recommendation.

On average, the top analysts’ consensus for Arista Networks on TipRanks is Hold.