Is There Now An Opportunity In Arista Networks, Inc. (NYSE:ANET)?
Let's talk about the popular Arista Networks, Inc. (NYSE:ANET). The company's shares received a lot of attention from a substantial price increase on the NYSE over the last few months. The recent jump in the share price has meant that the company is trading at close to its 52-week high. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Arista Networks’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Arista Networks
What's The Opportunity In Arista Networks?
The stock is currently trading at US$305 on the share market, which means it is overvalued by 26% compared to our intrinsic value of $242.53. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Arista Networks’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Arista Networks look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Arista Networks' earnings over the next few years are expected to increase by 42%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? ANET’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe ANET should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ANET for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for ANET, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Arista Networks, you'd also look into what risks it is currently facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Arista Networks.
If you are no longer interested in Arista Networks, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
