ANET: Bear turns bull…

Arista Networks (ANET) will increase its share in the cloud computing, data center market — and in a bull case — push into the enterprise market vs. Cisco Systems (CSCO) and others, says a Wall Street analyst who upgraded Arista to overweight.

Morgan Stanley analyst James Faucette upped his price target on Arista, a member of IBD’s Leaderboard, to 210 from 125.

“Our new price target is 40 times 2018 EPS, which is a premium to large-cap hardware and software companies on an earnings growth basis,” he added. “We think the premium is warranted given Arista’s fast growth, much better-than-industry margins, plus important optionality from its Hewlett Packard Enterprise (HPE) partnership and an eventual entry into the campus (enterprise) networking market.”

“We now expect Arista to achieve 19% share of the data center switching market by 2020, up from our previous assumption of around 14%,” Faucette said

Arista Networks’ margins have been boosted by a new software technology. Arista this year began selling a version of its networking software to run on so-called “white-box” computer hardware, built by lesser-known suppliers from Asia.

Arista has seemingly gained the upper hand in a lingering legal battle with Cisco. Arista has denied infringing Cisco’s patents, and it also says it has modified its network software to resolve issues.

  • there was a strong argument on this board that they merely had to change their software a bit. Bully for us (and you, whom I forget the name of)

ANET has tip-top growth ratings and is #1 in its stock group.

Composite Rating 99 Pass
EPS Rating 99 Pass
RS Rating 97 Pass
Group RS Rating A Pass
SMR Rating A Pass
Acc/Dis Rating B- Pass