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Arista Networks (ANET): 2019 Top Picks' Mid-Year Update
07/23/2019 5:00 am EST
Jim Kelleher, an analyst for Argus Research, selected Arista Networks (ANET) as his top speculative investment idea for 2019. The stock rose 24% during the first half of the year. Here's his latest update on this cloud and networking firm.
Arista Networks sold off on 6/7/19, following a generally upbeat analyst & investor day on June 6th. Investors responded negatively to a more cautious growth outlook from the company. The stock rose 21% in the first half of 2019.
At the same time, Arista announced further refinement of its campus strategy, an enhanced partnership with Microsoft Azure, and other long-term positives that reflect a further widening of Arista's available market.
Building on its Mojo Networks acquisition and its cognitive campus architecture, Arista announced a new family of campus leaf switches and WiFi 6 (802.11ax) access points.
Arista first announced its cognitive campus strategy in 2018, with spline switches that combine the functions of core and access switches. Also during 2018, Arista announced its CloudVision solution for unified wireless and wired campus environments.
Arista is also working with Microsoft to integrate Azure Cloud with Arista EOS to manage hybrid-cloud environments. The shares were slammed in May, falling 15% after the company delivered better-than-anticipated 1Q19 results but expressed caution regarding the 2Q19 outlook.
Arista, which has seen a slowing in its business with cloud titans, did not provide a more upbeat outlook for that business. We expect this digestive phase to work down across 2019, with strong growth resuming among cloud titans in 2020.
Having declined from peak prices in the $320s to the $250 level, ANET shares trade at levels last seen (briefly) in autumn 2018 and before that in winter 2018.
We regard share-price weakness as an opportunity to establish or add to positions in what we regard as a premier long-term holding in the cloud network space. We are reiterating our buy rating to a 12-month target price of $320.
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