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Buy Arista Networks Stock as a Cheap Bet on Cloud Growth, Citi Analyst SaysBuy Arista Networks Stock as a Cheap Bet on Cloud Growth, Citi Analyst Says Savitz, Eric J.Barron's (Online); New York With Arista Networks stock down 17% so far in January, Citi analyst Jim Suva contends the time has come to go bottom-fishing. Suva raised his rating on the networking-equipment company's shares on Monday to Buy from Hold, while maintaining a price target of $150, for a potential gain of more than 25%. Arista (ticker: ANET) is a bet on continued expansion of the cloud , and recent weakness in tech stocks does nothing to change that. Suva sees two upcoming positive catalysts for Arista stock. For starters, in the next two weeks, two of Arista's largest customers report earnings—Microsoft (MSFT), which reports on Tuesday, and Meta Platforms (FB), which reports Feb. 2. Suva notes that those two companies accounted for about 30% of Arista's 2021 revenue—and 40% of 2020. "Given the recent shift in strong demand from consumer to enterprise spending and increased cloud demand, we expect commentary about cap-ex spending should be positive for Arista," he writes in a research note. Arista itself reports results on Feb. 14. He expects "upbeat" commentary on the company's earnings call, and that the tone "is likely to surprise investors to the upside in contrast to other tech companies that will discuss Covid-related production and supply-chain issues." Suva sees fourth-quarter earnings of 74 cents a share, in line with Street consensus. Arista's guidance for the quarter calls for revenue of $775 million to $795 million, and non-GAAP gross margin of 63% to 65%. Arista stock soared more than 20% after the company's last quarterly earnings announcement, which also included a four-for-one stock split and a new $1 billion stock-repurchase plan. But Arista shares have now given back all of those gains. In early Monday trading, Arista stock is up 0.1% to $118.89, on a day with the Nasdaq Composite is off 2.4%. |
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