Checks indicate Arista Networks Inc (NYSE: ANET) should easily meet expectations in the current quarter and could continue to gain share going ahead, but its stock already reflects these positives following a recent rebound, according to Morgan Stanley.
Investors are now more confident about sustained growth in Arista Networks’ Cloud Titans vertical, Faucette said in the Tuesday downgrade note. (See the analyst's track record here.)
This has resulted in the stock appreciating 53 percent year-to-date, he said. Following this rebound, the valuation implies a more balanced risk-reward over the next 12 months, Faucette said.
Reseller checks indicate that the company’s campus products are tracking ahead of plan, with year-on-year growth rates in the high 20 percent, according to Morgan Stanley. While Arista continues to perform well in financial service, health care and manufacturing data centers, it has solid potential to expand, Faucette said.
Reseller commentary also indicates that strong overall buying and a healthy demand environment could lead to growth in networking spend in 2019, with campus switching and wireless being the main drivers, the analyst said.
Any upside to Arista's share price going ahead will likely be driven by its new campus networking business, the analyst said.
Estimates are building in reasonable growth expectations for this business, which could take five to seven years to reach its long-term revenue target of $1 billion, and contribute around $200 million in revenue in its first year, according to Morgan Stanley.
Arista Networks shares were down 2.48 percent at $319.58 at the time of publication Tuesday.
Benzinga's Top Upgrades, Downgrades For April 23, 2019
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|Mar 2019||Initiates Coverage On||Neutral|
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