Arista Networks is the IBD Stock Of The Day as the maker of computer networking gear gets a lift from customers splurging on data-center equipment for artificial intelligence. Meanwhile, ANET stock is near a buy point.
After a rocky ride following its second-quarter earnings report on July 30, ANET stock seems to have found its footing. Arista Networks stock now is approaching a buy point of 358.68 from a handle, based on IBD analysis.
That formation is 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 its 50-day moving average line.
On the stock market today, ANET stock gained 2% to close at 353.38.
Sales Growth Decelerating
In the June quarter, Arista Networks beat Wall Street's targets for sales and earnings. The Santa Clara, Calif.-based company earned an adjusted $2.10 a share, up 33% year over year, on sales of $1.69 billion, up 16%. But sales growth decelerated for the sixth straight quarter.
For the current quarter, Arista forecast sales of $1.735 billion, based on the midpoint of its guidance. Analysts had been looking for $1.73 billion.
"Arista highlighted strong momentum in customer AI interest with projects moving from trial to pilots," Needham analyst Alex Henderson said in a client note July 31. He rates ANET stock as buy with a price target of 375.
ANET Stock Is On Two IBD Lists
Arista sells computer network switches that speed up communications in internet data centers. Its chief rivals are Cisco Systems and Juniper Networks. It also competes with AI powerhouse Nvidia, which sells Spectrum-X Ethernet switches.
Arista has projected $750 million in artificial-intelligence-related revenue for 2025. Internet data centers will need more computing power and network bandwidth to process AI workloads.
"At this point, Arista's target for $750 million for 2025 AI revenue looks so conservative, all we can do is smile," Melius Research analyst Ben Reitzes said in a client note July 31. "We reiterate our buy rating for Arista given prospects for further enterprise share gains and significant AI upside still lies ahead."
Reitzes has a price target on ANET stock of 375.
ANET stock is 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.
