Arista Networks (ANET): A hot potato

By Michael Cintolo, Chief Analyst, Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 8/28/14 Sign up for Cabot Wealth Advisory—it’s free!

Growth stocks—most of which didn’t really get going during the May-June rally—are acting better and many have etched six month launching pads. One that I’ve been following hasn’t been consolidating for that long … but only because it just came public in early June! It’s Arista Networks (ANET), and here’s what I wrote about it in Cabot Top Ten Trader two weeks ago:

“Arista Networks has a story straight out of 1999, when the buildout of the Internet’s infrastructure was all the rage. In the networking world these days, the focus is on firms that have specialized data switches and software that help enable cloud computing, and Arista looks like a new leader in that respect—its products allow networks to be easily managed and quickly integrate apps and customized features. And that, in turn, lowers costs for large Internet companies and cloud service providers. Business has been growing rapidly, and the recent quarterly report confirmed that Arista remains in hypergrowth mode—not only did revenues grow 65% but earnings soared 95%, crushing expectations as profit margins exploded to 17.2%. Moreover, the company continues to broaden its customer base, adding another 200 customers to bring its total to 2,700. (Microsoft has historically accounted for 20%-plus of revenues but that should decrease as Arista expands.) Bottom line, Arista has best-in-class products and top-notch partnerships (it’s worked closely with VMware for years) that are taking share from the big players in the industry, including Cisco. There’s risk here, but if everything falls right, it could go very far.”

Shares rallied to 80 during their initial post-IPO surge and spent nearly eight weeks in a volatile consolidation. But this week, it lifted to the upside! We can’t say it’s completely free and clear of all resistance, and ANET is sure to be a hot potato, so keep your position size relatively small. But I think it could be nibbled at here, with the idea of adding a little more from time to time if the stock continues higher.

Chick here for more details.

Company Details

Arista Networks (ANET)
5453 Great America Parkway
Santa Clara, California 95054
Index Membership: N/A
Sector: Technology
Industry: Diversified Computer Systems
Full Time Employees: 750