Yahoo Finance Can the Incredible Rally in Arista Networks (ANET) Stock Continue?
Investors taking a second glance at Arista Networks ANET stock may notice that it has more than doubled since 2023 and is sitting on +47% gains this year.
As one of the market’s top performers, let’s see if the rally in the cloud networking giant’s stock can continue and if it's still time to buy.
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Consistency & Cloud Demand
With internet servers, software, and databases revolving around cloud networks which are a single ecosystem of connectivity, Arista's solutions have become critical to data centers and cloud computing environments.
Artificial intelligence has only enhanced this demand with Arista orchestrating AI networking centers through its Arista Etherlink AI Platforms designed to deliver optimal network performance for the most demanding AI workloads including training and inferencing.
Arista’s brilliance is reflected in the fact the company has surpassed the Zacks EPS Consensus in every quarter since it went public in 2014 and has now exceeded sales estimates for 18 consecutive quarters dating back to February of 2020.
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EPS Revisions Still Indicate More Upside
Taking notice of the trend of earnings estimate revisions, Arista's fiscal 2024 and FY25 EPS estimates are up 6% and 5% over the last 60 days respectively.
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Furthermore, annual earnings are now expected to jump 14% this year and are projected to climb another 12% in FY25 to $8.90 per share. Arista’s top line expansion has been significant as well with total sales forecasted to expand 14% in FY24 and projected to leap another 15% next year to $7.7 billion.
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Valuation Comparison
Often investors expect to pay a premium for a stock with such compelling growth as Arista and it is noteworthy that ANET trades at 42.1X forward earnings compared to its Zacks Communication-Components Industry average of 20.1X and the S&P 500’s 23X.
However, Arista does trade below Nvidia’s NVDA 47.2X which of course is another stock that has immensely benefited from the AI movement and had also more than doubled over the last year before a recent 10-1 stock split.
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Bottom Line
While investors may be amazed to see that Arista Networks stock is now trading over $300, the incredible rally in ANET does look like it can continue. For now, Arista’s stock sports a Zacks Rank #1 (Strong Buy) attributed to the trend of positive earnings estimate revisions.
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