Credit Suisse: Arista Networks Still A Buy

In a report published Thursday, Credit Suisse analyst Kulbinder Garcha reiterated an Outperform rating and price target of $90 on Arista Networks, Inc. ANET. The analyst believes that Arista possess the best secular growth opportunity among its peers in the IT Hardware and Networking segment. "Specifically, we believe the company has a unique technological advantage that allows it to disrupt the current oligopolistic networking market," Garcha explained, adding, "We recently met with the senior leadership team at Arista and we found the tone confident with multiple growth drivers building for the business (shift towards Cloud datacenter (DC) spending, switching market share gains, product portfolio evolution)." The management believes that it has multiple growth drivers that can help expand its DC switching market at a CAGR of more than 15 percent. The analyst expects the company to be able to achieve a 12 percent market share in switching, driven by a "1) shift towards Public Cloud and hypercscale companies as evidence by major capex growth, with Arista supplying 6/7 leading cloud providers, 2) the transition from 10GbE to 40GbE and above, 3) customer growth (company is now at 3,200 customers) and expansion within its customer base," the Credit Suisse report stated. The analyst also expressed confidence regarding the evolution of the company's product portfolio in the long term. Given that 2010 and 2013 were periods during which there were several new product releases, the analyst believes that 2016 would be the time for a refresh cycle, driven by the commodity silicon cycle. "Arista's core focus on leveraging commodity silicon combined with the EOS conveys multiple potential competitive edges: 1) allows the company to ride the commodity curve and Moore's Law, 2) provide customers the agility needed for today's networking environments, and (3) make the TCO price competitive by enabling not only lower capex but opex as well," Garcha added.