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US$344 - That's What Analysts Think Arista Networks, Inc. (NYSE:ANET) Is Worth After These Results

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Simply Wall St
·3 min read
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Last week, you might have seen that Arista Networks, Inc. (NYSE:ANET) released its annual result to the market. The early response was not positive, with shares down 9.6% to US$292 in the past week. The result was positive overall - although revenues of US$2.3b were in line with what the analysts predicted, Arista Networks surprised by delivering a statutory profit of US$7.99 per share, modestly greater than expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Arista Networks

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the current consensus from Arista Networks' 25 analysts is for revenues of US$2.68b in 2021, which would reflect a meaningful 16% increase on its sales over the past 12 months. Per-share earnings are expected to increase 7.2% to US$8.95. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.63b and earnings per share (EPS) of US$8.72 in 2021. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 15% to US$344per share. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Arista Networks, with the most bullish analyst valuing it at US$411 and the most bearish at US$260 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Arista Networks' revenue growth is expected to slow, with forecast 16% increase next year well below the historical 20%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.8% next year. Even after the forecast slowdown in growth, it seems obvious that Arista Networks is also expected to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Arista Networks' earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Arista Networks going out to 2025, and you can see them free on our platform here.

Even so, be aware that Arista Networks is showing 1 warning sign in our investment analysis , you should know about...

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.