To The Moon

I’ve been digging into $Arista Networks(ANET)$, and I believe it’s one of the most intriguing networking names to own as we head into Q2 earnings season.

When Arista reported Q1 FY 2025 (ended April 30) on May 6, the headline numbers reinforced my confidence:

• Revenue: $2.005 billion, up 27.6% year‑over‑year

• Adjusted EPS: $0.65, beating consensus by $0.06 (consensus $0.59)

• Gross margin: 64.1%

• Operating margin: 40.7%

• Stock buyback authorization: $1.5 billion (1.3% of shares outstanding)

Those figures tell me Arista is executing at scale—delivering mid‑20s growth while maintaining rock‑solid margins in a capital‑intensive space.

A few weeks ago, I was intrigued by Arista’s acquisition of VeloCloud from Broadcom for under $1 billion. That move plugs a critical gap—bringing mature SD‑WAN technology into Arista’s portfolio and accelerating its SASE (Secure Access Service Edge) ambitions. From my perspective, this bolsters Arista’s ability to offer end‑to‑end cloud‑networking solutions and cross‑sell into its massive data‑center customer base.

I see Arista positioned at the confluence of cloud data‑center growth, AI infrastructure demand, and enterprise WAN modernization. Analysts at KeyCorp, Citigroup, and JPMorgan have raised price targets lately—Citi to $130 and KeyCorp’s average target near $111.40—underscoring the bullish case. Consensus for FY 2025 EPS is $2.32 (up 12.6% YoY) on roughly $8 billion in sales.

Technical Setup

ANET Daily Chart

• Current RS Rating 84 - Arista has outperformed 84% of all stocks over the past 52 weeks, a classic pre‑breakout signal

• 50‑day SMA at $97.19 and 200‑day SMA at $94.78, both sloping up - price is now well above those averages, confirming the uptrend

• Short‑term consolidation: ANET has pulled back from its January 52‑week high of $133.57 into a sideways range. That sideways digestion is healthy, in my view, and sets up a potential springboard for the next leg higher.

Key levels:

• Support: $96-99 (low end of base)

• Resistance: $112-115 (near recent intraday high)

At $109.78, Arista trades at roughly 46× trailing EPS and 17× forward sales, reflecting its premium positioning in high‑growth networking. That multiple isn’t cheap, but I justify it because:

• Arista’s 40%+ operating margins are among the best in semis/networking.

• Its AI‑related revenue is projected to hit $750 million this year.

• The recurring‑revenue mix (software & services now ~17% of sales) adds high‑visibility annuity streams.

In my own risk/reward calculus, I’m looking for a 20–25% upside to JPMorgan’s $130 target—if Arista can reaffirm mid‑20s growth and gross margins north of 63% when they report Q2 results (likely August 5).

Risks I’m Watching

• Cyclical Capex: A sudden pullback in hyperscaler spending could dent orders.

• Integration execution: The VeloCloud integration must go smoothly to drive incremental revenue.

• Valuation sensitivity: Rich multiples mean any guidance miss could trigger a sharp pullback.

I’d consider dialing back exposure if ANET closes below $100 on heavy volume, invalidating its recent consolidation base. For me, ANET today offers a balanced risk/reward: compelling secular tailwinds in AI and cloud networking, backed by proven margin profile and a technical structure that suggests the bulls remain in control.

@MillionaireTiger @Tiger_comments @Daily_Discussion @CaptainTiger @TigerSG

Disclaimer: This is a general analysis and not financial advice. Always conduct your own research before making any investment decisions.