ANET

ANET downgraded to Neutral by Cleveland Research this morning. Only got the headline not the thinking behind it.

Rob

2 Likes

Here’s a little more:

Cleveland Research downgraded Arista Networks (ANET) to Neutral from Buy. Analyst Ben Bollin expects results near-term to be more in line and reduced FY18 earnings forecast to $7.06 from $7.62 and revenue growth to +29% from +33% prior. Bollin said Hyperscale customers are likely to have slower growth given some shifts towards whitebox and Cisco (CSCO) price aggression. However, the analyst notes feedback suggests additional share gain in enterprise and service provider and sees Amazon (AMZN) as a potential new customer with 400GB investment, but not until 2019 or later.

Read more at https://thefly.com/landingPageNews.php?id=2712534

Matt
Long ANET
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/TMFCochrane/info.aspx

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Is it algorithms that react to this type of news and precipitate a big swing. It is pretty common knowledge that analysts opinions are just that, and often based on short sighted thinking.

This seems a hyper overreaction, which in turn causes fear, leading to others selling to lock in profits, etc.

There is so much I will never understand about these daily fluctuations, and I doubt I ever will. However, fundamentally nothing has changed, so I figure I don’t have a good reason to sell…so I don’t.

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Ben Bollin is not held in high regard over at tipranks.

https://www.tipranks.com/analysts/benjamin-bollin

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NTNX had become a 19% position (my highest). I trimmed couple percent this morning and put it into ANET.

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doppleg36. Wow. If that site is even remotely accurate, the guy is just awful. “10,483 out of 11,161 overall experts” This is a gift to long term ANET shareholders. I have a full position but man am I tempted to add more on this.

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doppleg36. Wow. If that site is even remotely accurate, the guy is just awful. “10,483 out of 11,161 overall experts” This is a gift to long term ANET shareholders. I have a full position but man am I tempted to add more on this.

I would ignore that site because there were only 2 people who ranked him and who knows who they are (e.g. a soccer mom?).

Chris

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Ben Bollin is not held in high regard over at tipranks.

LOL, his success rate is 0%!

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Both analysis service documents I can get through my broker are favorable to ANET:

http://djcs.gtm.idmanagedsolutions.com/cxb/analystpdf/argus/…
http://djcs.gtm.idmanagedsolutions.com/cxb/analystpdf/Market…

I’m pretty sure that both of these services are independent, so they’re not in the business of buying or selling the securities they analyze.

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FWIW, an article about Cleveland Research…

Why Cleveland Research Heats Up The Market
https://realmoney.thestreet.com/articles/10/03/2016/why-clev…

The firm prides itself on its core competency: channel checks. (Channel checks were also the bread and butter of Midwest Research prior to its sale to FTN.)

“We are talking to suppliers and customers, developing contacts, and conducting surveys day after day, month after month allowing us to spot trends and inflection points in the end markets we cover,” the firm states on its website.

Former Cleveland Research technology research analyst Bradon Slapak told Real Money in a phone interview that those channel checks involved cold calling, brute effort and leveraging internal resources. Slapak said what really sets Cleveland Research apart is its ability to put together “different pieces that other people don’t have – not illegal – through conversation.”

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FWIW, an article about Cleveland Research…

Why Cleveland Research Heats Up The Market
https://realmoney.thestreet.com/articles/10/03/2016/why-clev…

By Anders Keitz | Oct 03, 2016 | 12:30 PM EDT

Fascinating. Thanks.

This is interesting:

Cleveland Research boasts on its website of having 150 of “the largest institutional investors in the U.S.” as its only clients. But even with these major institutional clients that have extensive market exposure, its research is still able to catch the market by surprise. On Sept. 9, Cleveland Research analyst Steve Willoughby downgraded Thermo Fischer Scientific (TMO) stock to Neutral after channel checks suggested softer trends for the third quarter. Based on that note alone, TMO dropped 4.6% on the day-- a massive move for just one note to inflict on a company with a market cap of more than $60 billion.

Here is how the stock behaved, immediately and longer term:

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?s…
It immediately went down (Sept 2016), then longer term up (June 2017).

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Channel checks are like under-polled polls. They are anecdotal, context is ignored, future intentions are weighed as present and even exaggerated, and there are different product subcategories that get lumped together.

For Arista, yes, Microsoft with SONIC has been moving to white boxes. Same was said in 2016 by an analyst that I linked to, but whooops, Arista accelerated. Arista operates mostly in the core, which is the most complex area of the network, thus more insulated from white boxes. I have heard some analysts say (some means more than one, and unrelated to each other) that white boxes will never make it into the core of the network (hate that word never).

But channel checks need to make distinction between switches into the core, switches on the edge,switches at 100 gb, switches with dual router functionality, etc.

The channel checks also have to distinguish impression from someone vendor from gossip they heard to actually what happened without exaggerating things, or under stating things.

In the end, the more complex the product and product category, the more diverse the players, the less and less accurate such studies are. To the point that it can practically be useless.

I have no way to say either way with this study, but one can easily state that this is a very complex product category, with very diverse players, with multiple product categories that are all referenced by the same name generally, and with ever changing and accelerating road maps and aspirations.

So take it for what it is worth. I wish it were worth more. We could all just short, short term, or buy here long term. It is just a channel check study.

Tinker

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in a phone interview that those channel checks involved cold calling, brute effort and leveraging internal resources.

Who answers cold calls? Only somebody with nothing better to do and a weird desire to impress complete strangers . No doubt you get answers but they may be mostly BS. “Brute Effort”???

Now that I know the dubious methodology I am much more likely to buy ANET than to sell.
We will have an earnings report in 3 weeks that will answer a of of questions. I do hope management is a bit less confusing this time. This is a seasonally slow time, and even if channel checking worked, it would not show potential sales in later quarters.

If Cleveland Research is paid such high dollars by its clients, wouldn’t it stand to reason that any report released publicly is designed to get the stock price moving in direction its clients want? So they either have a big short to cover or are looking for a buying opportunity?

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For Stock Advisor members:
http://discussion.fool.com/1081/big-drop-why-33037730.aspx?sort=…

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Bollin said Hyperscale customers are likely to have slower growth given some shifts towards whitebox and Cisco (CSCO) price aggression.

Cisco is aggressive in pricing precisely because ANET has been taking market share from them. That is a defensive move, not offensive. ANET’s technology is superior to Ciscos.

As to “white boxes”, I believe that is where ANET really kicks Cicso – their software-defined-network systems are designed to utilize off-the-shelf hardware; Cisco requires you to buy their very expensive proprietary hardware. Yes, ANET makes some proprietary hardware as well, but the reason they began to eat into Cisco’s dominance was because they allowed customers to use generic hardware.

Mr. Bollin seems, well, ‘a few bricks shy of a load’.

Tiptree, Fool One guide, long ANET (currently 15.5% of my portfolio)

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ANET downgraded to Neutral by Cleveland Research this morning. Only got the headline not the thinking behind it.

You can’t find what doesn’t exist.

Dan

1 Like