The cloud computing network industry hit a peak late last year and then slid 20%, but it's trying to make a comeback, led by Arista Networks. The company, today's pick for IBD 50 Stocks to Watch, is among the best stocks to buy and watch.
Arista Networks is forming a first-stage cup-with-handle base, with a buy point of 143.67. Volume has been light as the handle forms, which is a good sign.
The stock is still down about 11% year to date, but shares are just touching the 50-day and 21-day-average lines, and are well above the 200-day moving average.
The Santa Clara, Calif.-based cloud computing company saw earnings and sales growth improve in the fourth quarter. Earnings per share increased 32% vs. a 21% increase in the third quarter. Revenue rose 27% after a 24% increase in Q3.
Best Stocks: Analysts Expect Strong Earnings
Analysts are expecting 81 cents earnings per share for the first quarter, which would be growth of 28% from a year ago. Arista will announce results May 2 after the close. For the full year, analysts expect 27% growth. Estimates for the full year were recently revised higher.
The company has a 95 Composite Rating and earns the No. 1 rank among its peers in the Computer-Networking industry group, which is ranked No. 60 out of 197 industry groups.
Arista's Relative Strength Rating of 94 is another reason it can be considered among the best stocks.
Citi analyst Jim Suva maintained his buy rating last week for Arista. He noted that Arista has been more effective at procuring necessary parts for its hardware and software equipment than some of its competitors like Cisco Systems.
In related news, Arista announced Tuesday the extension of its Arista EOS (Extensible Operating System) and CloudVision software to support high-performance switched networks for media and entertainment customers. That announcement would make broadcast workflows an integral function and allow Arista customers to gain faster audio and video streams, the company said.
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