Arista Networks: A Beat And Raise Story

Arista Networks Inc (NYSE: ANET) reported a solid beat and raise quarter for the fourth quarter.

Deutsche Bank’s Vijay Bhagavath maintains a Buy rating on the company, while raising the price target from $105 to $120.

Beat And Raise

Arista Networks reported revenue of $328 million for Q4, with EPS of $1.04. Both measures came in ahead of consensus expectations of $317 million in revenue and EPS of $0.82.

The analyst emphasized the significant ramp in the company’s 7500R 100G Switch-Routers (Jericho based) during the quarter, while mentioning that Microsoft Corporation (NASDAQ: MSFT) represented 16 percent of Arista Networks’ total revenues for FY 2016, up from the 12 percent in 2015.

Management expects 100 R-Series (Jericho based) customers by Summer 2017.

Bhagavat pointed out that Cloud Content providers saw the most robust year on year improvement, with management noting that there could be potential for “Cloud Specialty Providers” to emerge as a distinct category to drive significant growth.

“While management would not confirm pre-buying, it is reasonable to assume a modest amount of pre-buying given the recent CBP 177 ruling revocation. That said, ANET indicated lead-times normalizing,” the analyst stated.

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Looking Ahead

Bhagavat went on to note that 10 percent of the Datacenter Switching market was currently at 100G speeds, a speed that comes as the highest average selling price (ASP), while stating that the 100G Switching refresh was still in an early cycle at major Enterprises, Hyperscale Clouds, and Carriers.

The analyst expects Arista Networks’ Jericho Silicon Routers winning multi-year design contracts at U.S. Telcos and Clouds to be a primary upside driver to the consensus expectations for FY 2017.

Bhagavat expects the company to deliver top line CAGR of 20 percent for fiscal years 2017–2019.

At last check, shares of Arista Networks were up 17.50 percent at $117.70.