Arista stock is falling as investors aren’t getting the “near-perfect” returns they want

Arista Networks Inc. may have needed a “near perfect” earnings report to meet Wall Street standards because the company had a “near top valuation,” according to an analyst at Piper Sandler.

Still, Arista shares ANET, -0.56% fell about 7% in Thursday’s extended session as the networking giant merely met expectations with its latest sales and revenue outlook, despite comfortably beating earnings expectations.

“While margins are astonishingly high, the timing of deliveries we estimate is up [greater than] “$100 million resulted in some disappointments,” Piper’s James Fish wrote in a note to clients.

With some reported sales expected to be pushed into the current quarter, he added that the first quarter outlook, which was in line with expectations on paper, could be viewed as actually weaker than expected because consensus did not take the postponement into account – Outs.

The networking giant forecasts revenue of $1.52 billion to $1.56 billion for the current quarter, while analysts tracked by FactSet expect revenue of $1.53 billion.

Arista executives also expect a gross margin of 62%, while the consensus opinion implied an expectation of a gross margin of 63%.

For the full year, management reiterated its target of sales growth of 10 to 12%.

“Many may view the overall 2024 forecast as conservative, but we consider it cautious given the cyclicality of the sector, uncertainty in AI Ethernet shipments, and the introduction of a new CFO,” Fish wrote, but maintained his neutral rating Share.

Evercore ISI’s Amit Daryanani wrote that “the lack of revenue growth” likely caused the stock’s decline in the aftermarket, although he said the company “remains well-positioned to sustain high-teens revenue growth over the next few years.” ” and to do so most likely “do so with better end market diversity compared to what we have seen in the past.”

Daryanani added that “AI opportunities continue to appear to be significant upside leverage,” as he addressed management commentary that said Arista won four out of five tenders the company participated in, “with the losing bid within the InfiniBand structure remained”.

In the fourth quarter, Arista reported net income of $613.6 million, or $1.92 per share, compared to net income of $427.1 million, or $1.35 per share, in the year-ago period. On an adjusted basis, Arista reported earnings per share of $2.08, up from $1.41 a year ago and above the FactSet consensus of $2.08.

Revenue was $1.54 billion, up about 2% year-over-year. Analysts had expected $1.53 billion.

“We are cautiously optimistic about achieving our AI revenue target of at least $750 million in AI networking in 2025,” Chief Executive Officer Jayshree Ullal said on the earnings call.

Arista stock has gained 36% over three months and 111% over 12 months.

Networking rival Cisco Systems Inc. CSCO, -0.28% reports quarterly results Wednesday afternoon.


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Robert Wilson

Business & economics analyst. Breaking down intricate financial trends for informed decision-making.

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