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On Tuesday, Evercore ISI made a revision to its price target for Arista Networks (NYSE:ANET), reducing it from $130.00 to $100.00, while still maintaining an Outperform rating on the company’s shares. The adjustment comes amid a challenging year for Arista, which has seen its stock price decline by 33% year-to-date to $73.59, outpacing the broader market’s downturn, with the NASDAQ’s QQQ index falling by 13% over the same period. Despite the recent decline, InvestingPro analysis shows Arista maintains a "GREAT" financial health score of 3.44 out of 5, with particularly strong metrics in profitability and cash flow management.
According to Evercore ISI, Arista Networks is in a strong position to outperform the low revenue expectations set for the company, the lowest in recent years. The firm’s analysts believe that the market has overly penalized Arista, turning it into a consensus short, based on concerns that the company has lost market share to significant clients like Meta (NASDAQ:META) and Oracle (NYSE:ORCL) in back-end networking. InvestingPro data reveals the company’s strong fundamentals, including a healthy 19.5% revenue growth in the last twelve months and an impressive return on equity of 33%. For deeper insights into Arista’s market position and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
Despite these worries, Evercore ISI remains optimistic, suggesting that Arista Networks is on track to meet its $750 million back-end AI revenue target and to achieve growth rates in the low 20s percentage range for calendar year 2025. This outlook is more positive than the current growth guidance of 17%. The firm has also added Arista to its tactical outperform list, anticipating that the company will maintain its full-year revenue guidance and hit its back-end AI revenue goal. Supporting this optimistic outlook, InvestingPro highlights that Arista holds more cash than debt on its balance sheet and maintains a strong current ratio of 4.36, indicating robust financial flexibility to fund its growth initiatives.
The research firm acknowledges the ongoing debate around Arista’s market share at Meta but expects Arista to continue gaining ground in enterprise networking, including campus and data center segments. Additionally, they foresee opportunities for Arista to expand its business with Apple (NASDAQ:AAPL)’s increased plans for AI data centers.
Evercore ISI also notes a potential modest negative impact from a 10% baseline tariff on countries other than China. Since Arista’s manufacturing is primarily located in Mexico and Malaysia, the firm has reduced its earnings per share (EPS) estimates for Arista by approximately 2% each quarter to account for the tariff’s effects.
In conclusion, while the price target has been lowered to reflect the EPS and multiple cut, Evercore ISI maintains Arista Networks as a top pick, believing that the risks related to market share loss are exaggerated. The firm looks forward to Arista’s upcoming first-quarter earnings report on May 6, 2025, as a potential catalyst for its tactical recommendation. With a P/E ratio of 32.7 and strong profitability metrics, including a gross profit margin of 64.13%, Arista continues to demonstrate solid fundamentals. Investors seeking detailed valuation analysis and additional insights can access comprehensive metrics and 12 more exclusive ProTips through an InvestingPro subscription.
In other recent news, Arista Networks has seen a flurry of activity from analysts regarding its stock ratings and price targets. UBS upgraded Arista Networks from Neutral to Buy, raising the price target to $115, based on a positive outlook for data center capital expenditures, which are projected to grow significantly. Meanwhile, Evercore ISI maintained its Outperform rating with a $130 price target, despite recent executive departures, reaffirming confidence in the company’s leadership and performance. Similarly, JPMorgan reiterated its Overweight rating with a $140 price target, highlighting the potential for earnings growth driven by increased adoption of Ethernet in AI data centers.
Piper Sandler raised its price target slightly to $108 while maintaining a Neutral rating, following Arista’s earnings report that met expectations but was tempered by concerns over losing Meta as a customer. The report noted Arista’s progress in the enterprise market and among major cloud and AI clients. Despite these positive developments, some analysts, like Piper Sandler, remain cautious due to market dynamics and competition. Evercore ISI also commented on the competitive landscape, particularly with the emergence of Nexthop AI, a startup founded by a former Arista executive. These updates reflect ongoing evaluations of Arista Networks’ position and prospects in the market.
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