Arista Networks Poised for Post-Pandemic Gains

Arista Networks, the provider of cloud-based networking services for data centers and campuses, reported stronger-than-expected earnings and revenue.
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Arista Networks, the provider of cloud-based networking services for large data centers and campuses, reported fourth-quarter earnings fell 29% on 17% higher revenue.

Both figures, as well as the company's first-quarter revenue estimate, were stronger than Wall Street analysts had estimated.

The Santa Clara, Calif., company earned $2.31 a share against $3.25 in the year-earlier quarter. The latest adjusted earnings were $2.49 a share.

Revenue reached $648.5 million from $552.5 million.

A survey of analysts by FactSet produced consensus estimates of GAAP earnings of $2.15 a share, or an adjusted $2.39, on revenue of $629.9 million.

For first-quarter 2021, Arista pegged revenue at $630 million to $650 million. The FactSet survey was calling for $608.9 million.

At last check after hours Arista Networks shares were trading up 6.9% at $330. They finished the regular Thursday trading session off 1.1% at $308.85. 

On Tuesday they touched a 52-week intraday high above $326, more than twice the 52-week low of $156.63, set late last March.

Gross-profit margin in the fourth quarter narrowed to 63.9% from 64.5%.

"Arista is well positioned to continue our momentum in the post pandemic era,” President and Chief Executive Jayshree Ullal said in a statement.

In late January Barron's reported that J.P. Morgan analyst Samik Chatterjee affirmed an overweight rating on the stock and lifted his price target to $350 from $330. 

The analyst had noted the runup in Arista shares, which he attributed to improved sentiment regarding spending for cloud technology as well as Arista management’s “confidence in a recovery in the growth rate.”

He did say he was concerned that Arista could lose market share as the networking sector shifts to fast 400-gigabit hardware.

But he also saw upside for Arista driven by what he expected to be better-than-estimated December-quarter revenue plus March-quarter guidance above Wall Street’s consensus.