IBD Stock Analysis
- Stocks recover after 50-day undercut this week
- ANET approaching 358.68 buy point
Ranking of industry groups
Emerging pattern
Consolidation
* Not real-time data. All data shown was captured at 11:28AM EDT on 08/30/2024.
Arista Networks (ANET) is the IBD stock of the day as the maker of computer networking equipment gets a boost from customers spending on artificial intelligence data center equipment. Meanwhile, ANET stock is approaching a buy point.
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After a bumpy ride following its second-quarter earnings report on July 30, ANET stock appears to have found its footing. Arista Networks shares are now approaching a buy point of 358.68 from a handle, based on IBD analysis.
That formation falls within an eight-week consolidation pattern that offers a follow-on buy point of 376.50, according to IBD MarketSurge charts. That secondary buy point is also the all-time high for ANET stock, reached on July 9.
In a positive sign, ANET stock has found support at the 50-day moving average line.
Today, ANET shares rose 2% on the stock exchange, closing at 353.38.
Sales growth slows
In the June quarter, Arista Networks beat Wall Street targets for revenue and profit. The Santa Clara, California-based company earned an adjusted $2.10 per share, up 33% year over year, on revenue of $1.69 billion, up 16%. But revenue growth slowed for the sixth straight quarter.
For the current quarter, Arista forecast revenue of $1.735 billion, based on the midpoint of its forecast. Analysts had expected $1.73 billion.
“Arista highlighted strong momentum in customer interest in AI, with projects moving from trial to pilot,” Needham analyst Alex Henderson wrote in a client note on July 31. He rates ANET shares a buy with a price target of 375.
ANET shares are on two IBD lists
Arista sells computer network switches that accelerate communications in Internet data centers. Its main competitors are Cisco systems (CSCO) and Juniper Networks (JNPR). It also competes with AI powerhouse Nvidia (NVDA), which sells Spectrum-X Ethernet switches.
Arista predicts $750 million in revenue from artificial intelligence by 2025. Internet data centers need more computing power and network bandwidth to handle AI workloads.
“At this point, Arista’s $750 million target for AI revenue in 2025 seems so conservative that we can’t help but smile,” Melius Research analyst Ben Reitzes said in a client note on July 31. “We reiterate our buy rating on Arista given the company’s continued share gains outlook and the significant AI growth still ahead.”
Reitzes has a price target for ANET shares of 375.
ANET stock is listed on two IBD stock lists: IBD 50 and Tech Leaders.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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