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Investors Business Daily
Investors Business Daily
Business
BRIAN DEAGON

Arista Networks, IBD Stock Of The Day, Rides Growth In Data Centers

Arista Networks is the IBD Stock Of The Day, as ANET stock is forming a base after a long consolidation.

The company provides cloud networking software and hardware and is expected to benefit from the growth of data centers. ANET's high-end ethernet switches speed up communications among racks of computer servers.

ANET stock has been consolidating going all the way back to 2021. However, starting in mid-August ANET stock began to form a base, with a buy point of 132.97. See if it can perform a strong breakout in big volume.

ANET stock dropped 1.6% to close at 112.89 on the stock market today.

Arista's biggest revenue growth driver has been high-end ethernet switches that speed up communications among racks of computer servers packed into data centers. Two of the company's biggest customers have been Microsoft and Facebook owner Meta Platforms.

Two of its competitors are Cisco Systems and Juniper Networks .

$1 Billion In Revenue For The First Time

Arista reported second-quarter results on Aug. 1 that beat estimates on earnings and revenue. Arista earnings rose 59% from a year earlier to $1.08 per share, topping estimates of 92 cents.

Further, revenue grew 49% to $1.05 billion vs. forecasts for $979 million, topping the $1 billion mark for the first time.

"In Q2 2022, we achieved our first billion-dollar revenue quarter, despite the challenges of an uncertain supply chain environment," said Chief Executive Jayshree Ullal, in prepared remarks with the earnings release.

"This record milestone further validates the customer value of Arista's differentiated cloud networking platforms, now adopted by many of the largest cloud and enterprise customers around the world."

ANET Stock: Third-Quarter Revenue Tops Estimates

For the third quarter, Arista said it expects revenue in a range of $1.025 billion to $1.075 billion. ANET stock analysts had predicted revenue of $996 million.

According to IBD Stock Checkup, ANET stock has an IBD Composite Rating of 99 out of 99. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.

Its Relative Strength Rating is 92. It means that ANET stock has outperformed 92% of all stocks over the past 12 months. Ideally, look for stocks with a rating of 80 or higher.

In addition, the relative strength line, which compares a stock's price performance with that of the S&P 500, is at record highs. An upward-trending RS line tells you the stock is outperforming the general market. It's a bullish sign when the line is in or near new high ground at the time of a breakout.

Arista has the No. 1 ranking in IBD's Computer-Networking industry group. Second is Digi International, while Sierra Wireless is third.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.

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