Arista stock on track for best trading day on record amid buyback program cheers and growth opportunities
Arista Networks Inc. shares are advancing to their best trading day on record after the networking company beat expectations with its latest results while announcing plans for a major share buyback and stock split.
Arista’s ANET stock,
is up 24.8% in Tuesday’s trading and on track for its biggest single-day percentage gain on record. The current record is a rally of 21.8% on July 1, 2014.
In addition to releasing its results on Monday evening, Arista hosted an analyst day that fueled optimism about the company’s long-term income opportunities.
“Arista’s combination of 3Q21 earnings print and analysts day offered many positive surprises to investors and is expected to result in significant upward revisions to consensus earnings, not only for 2021 or 2022, but also for normalized profits throughout the cycle, ”wrote Samik Chatterjee of JP Morgan. in a note to customers.
Chatterjee highlighted strong demand from cloud customers and an accelerated 200G / 400G upgrade cycle, both of which contribute to expectations of revenue growth of around 30% in 2022, compared to estimated growth of around 25% this year.
“The confidence shown in the revenue forecast is a testament to the strong order book the company already has and the assurance of supply through its purchasing commitments, positioning Arista well in both demand and demand. the offer, ”Chatterjee wrote.
While Arista’s forecast of a 15% compound annual growth rate from 2020 to 2025 was lower than he had expected, Chatterjee said Arista’s management team may have adopted a conservative approach to this projection.
“[W]We believe investors will recognize the conservatism that the management team is likely incorporating into updated long-term guidance after encountering difficulties in meeting previous targets issued on Analyst Day 2019, ”he added. he writes, while maintaining an overweighting and increasing his target price. to $ 500 from $ 455.
Jefferies analyst George Notter also suspected some conservatism in the forecast and specifically highlighted the 30% revenue growth target for 2022. There are opportunities for Arista to increase revenue through awards. higher, increased campus sales and the realization of accumulated deferred income. , he said, while there is also room for significant growth in the core business.
“Beyond that, it’s clear that Facebook will be considerably bigger next year,” he added.
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Notter also underlined the “better visibility” of Arista on her activity. While Arista management announced four-month lead times for pending orders, executives also noted that cloud customers “are giving the company more than a year of visibility right now (up from 1 in 2 typical quarters), ”Notter wrote.
He has a wait rating on Arista’s action and admitted that he “missed it”. Notter recommended Ciena Corp. CIEN,
stock “as a much cheaper way to play many of the same data center trends as Arista.” (Ciena shares rose nearly 9% in Tuesday’s trading.)
Evercore ISI analyst Amit Daryanani addressed Arista’s discussion of her large cash balance and the flexibility she offers in terms of making purchase commitments.
Arista “is investing heavily in the business, including $ 2.1 billion purchase commitments that will give Arista a powerful weapon to accelerate equity earnings.” The gains could occur “not only against traditional network providers,” he continued, but also against white box providers like hyperscalers.
Daryanani rates the stock to outperform and increased his price target to $ 480 from $ 420.