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Reasons To Buy The Arista Networks Weakness

Reasons To Buy The Arista Networks Weakness
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KeyBanc Capital Markets recommends buying the recent weakness in Arista Networks Inc (NYSE: ANET) shares.

The firm maintained its Overweight rating on the shares of Arista Networks and upped its price target from $200 to $213.

After slumping 8.16 percent to $181.17 on Thursday, shares of Arista Networks were up 10.95 percent at $201 in pre-market trading.

Arista reported a third-quarter adjusted EPS of $1.62 against a $1.19 estimate after the close Thursday and sales of $437.6 million versus a $418.5 million estimate. 

Arista Networks reported solid product revenues of $380 million, ahead of their estimate of $356 million, analyst Alex Kurtz said in a Thursday note. Arista's fourth-quarter guidance implied 35-40 percent year-over-year product growth compared to expectations in the low-30s, Kurtz said. (See Kurtz' track record here.) 

"Cloud titans, service provider, cloud specialized providers, and enterprise were the top verticals (in order) during 3Q17," the analyst said. 

Based on the reported results and guidance, KeyBanc Capital Markets raised its estimates for the company.

KeyBanc said the recent sell-off in Arista shares was driven by weakness at Applied Optoelectronics Inc (NASDAQ: AAO), Oclaro Inc (NASDAQ: OCLR) and Juniper Networks, Inc. (NYSE: JNPR).

The weakness, Kurtz said, is a buying opportunity, as the company is now focused on a more diversified customer and vertical mix, weaning away from Microsoft Corporation (NASDAQ: MSFT), which now accounts for 10 percent of its business.

Strong FlexRoute adoption continued, up to 150 from over 100 last quarter, Kurtz said. Arista's strong operating leverage helped maintain a strong contribution model, with a 39 percent operating margin compared to guidance of 30 percent.

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Arista Networks: Analyst Likes The Company But Not The Valuation 

Latest Ratings for ANET

Dec 2017Stifel NicolausReinstatesBuy
Nov 2017Wells FargoReinstatesMarket Perform
Nov 2017PiperJaffrayInitiates Coverage OnNeutral

View More Analyst Ratings for ANET
View the Latest Analyst Ratings

Posted-In: Alex Kurtz KeyBanc Capital Markets Steve EndersAnalyst Color Price Target Reiteration Analyst Ratings Tech Best of Benzinga


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