A new high for ANET. Unfortunately I previously sold it and despite the mistake, find it difficult to regret as I did not understand the litigation going on. Now, although it’s growing like a weed, the price seems far beyond. Comments welcome.
Cisco is toast and trying everything they can think of to stop Arista from continuing to gain ground. First Cisco sues Arista. OK, that created a hiccup, but that’s not lasting. Now it’s the old “if you can’t beat 'em, join 'em.” Cisco has announced that they are going to be putting out a stand alone version of their network operating system (http://www.barrons.com/articles/cisco-likely-wont-beat-junip…).
Just as smart people saw the lawsuits as proof that Cisco was scared, this new copycat approach shows me that Cisco is really worried about losing business.
Arista is one of my strongest conviction stocks. Unfortunately, I’ve gotten accustomed to buying the stock/selling Puts in price valleys due to lawsuit noice… I’m still kicking myself for only selling Puts at the last drop - I’ll make some short term income but I should have bought more actual stock for the much larger long term gain.
You may be right about the company - strongest conviction - but momentum has taken the price into the stratosphere, too high for me to have investment conviction: the multiples rely on growth way over 30%, always a risky scenario! On the watchlist.
momentum has taken the price into the stratosphere
Last quarter the expectation was that ANET would earn $0.80/share. It reported earning $1.04/share. Trailing EPS is about $2.50, but analyst consensus is for earnings of $3.77 in the current fiscal year. That’s an annual earnings growth rate of 50%. And the analysts predictions have been under actual earnings every quarter for at least the last 8 quarters (http://www.nasdaq.com/symbol/anet/earnings-surprise). So if you think ANET needs growth on the order of 30%, well, we’re seeing %50 growth already.
Now, I won’t argue that you should buy ANET now. As I said last post there have been opportunities a couple times a year where ANET’s price gets hit (see chart at bottom here: http://www.nasdaq.com/symbol/anet/earnings-surprise). But, in my view this is a true Innovator’s Dilemma type company. The entrenched big players, most notably Cisco, are stuck between a rock and hard place. They have to keep making and incrementally improving their legacy products, since the volumes aren’t there to support a company their size in SDN yet. But, for a small company like Arista, the SDN market is a great size and growing at a great pace, and Arista is the leader there by far. Just as Steam Shovels went to hydraulics, point node switching hardware is going to centrally configured and flexible network management. The advantages range from lower cost to higher security.
Many thanks for those very interesting facts. Point node switching I do a lot of with the tomatoes in the greenhouse and my housekeeper is a good example of being centrally configured and flexible. I will certainly keep an eye on ANET.