Can Arista Networks, Inc. Stock Keep Hitting New Highs?

The stock has hit nine new all-time highs since March 8 with a recent small pullback in the last two weeks. Arista Networks, Inc. (ANET: NYSE) is headquartered in Santa Clara, California, and was formerly known as Arastra, Inc. before the name was changed in October 2008 It was incorporated in 2004. ANET provides services to telecommunication service providers, internet companies, service providers, financial services firms, government agencies, as well as media companies, among others. Products are marketed and sold through distributors, system integrators, value-added resellers, and OEMs, as well as by its own sales representatives. The company employs 3,612 full-timers.

The company sells cloud-based networking capabilities in the northern hemisphere, as well as in Asia, the Middle East, Africa, and  Europe.  Additionally, it offers customer technical support, hardware repair, and parts replacement. The company earnings have beaten consensus for the last four quarters, with the last two by $0.20 a share.  The next earnings report is due in approximately two weeks on May 1, 2023.

The current market cap is $50 billion. ANET has a low P/E ratio of 29.80, well below that of average VectorVest stock at 47.96. Moreover, it has forecasted earnings per share of $5.49 for the year ahead. The average daily trading volume of 2.7 million shares is more than sufficient for obtaining favorable trade executions. Currently, 1,272 institutions hold 71% of the shares, with The Vanguard Group holding 9%  and  Blackrock Inc. holding  6% each.  Insiders hold a 23% stake which shows their confidence in the company’s future prospects. The company currently pays no dividends.

VectorVest ranks ANET #1 in its universe of 42 Telecommunication Equipment stocks, as well as #1 out of 135 stocks in the Telecommunications sector. That high dual ranking provides an indication of the company’s preeminent standing in its industry. Its high rankings are understandable with a strong 29% sales growth over the past year, and its consistent year-over-year earnings growth. One important factor to consider is that the Telecommunications sector is ranked 20 out of 40 based on a Relative Timing (RT) which puts it smack in the middle of the pack, but that doesn’t mean that individual stocks in that sector, such as ANET will not be able to rise based their individual merits.

The stock had a solid run from its low on June 16, 2022, at $90.42 to its current price of $164 on April 14 for a gain of 81.3%, compared to the gain of  12.7% for the S&P 500 Index, during this same time period. ANET’s price has been above its 40-day moving average since late January.  Its all-time high was achieved on March 23 with a close of $169.39. One positive development was the RT breaking above 1.0 on January 31 with its very high current reading of $164.41.  One recent cautionary note is the MACD crossing to the downside on March 30.  This indicator needs to reverse direction with a positive crossover before the stock should be considered for purchase.

ANET Offers Top VectorVest Scores But Is Overvalued and May Consolidate Here

Consider VectorVest’s specific evaluation of ANET’s key metrics:

• Excellent Upside Potential: The Relative Value (RV) rating focuses on a stock’s long-term, three-year price appreciation potential. The current RV rating for ANET is 1.50 which is higher than the average on a scale of 0.00-2.00. VectorVest’s current value of this stock is $142.36 and its current price is $163.60; therefore it is overvalued which is not a positive characteristic as far as conservative investors.
• Excellent Safety: The Relative Safety (RS) rating is based on the company’s business longevity, financial predictability/consistency, debt-to-equity ratio, and additional risk parameters, including price volatility. Its RS rating of 1.41 is above average, indicating limited risk.
• Excellent Timing: The Relative Timing (RT) rating focuses on the price trend over the short, medium, and long term. The components include price direction, dynamics, and price magnitude of price changes over daily, weekly, quarterly, and yearly comparisons. ANET has a significantly high RT rating of 1.53 compared to the average 0.89 RT of all the stocks in the database. Interestingly, the chart’s MACD indicator has been in a downtrend since March 30, as the price backed off from its high on March 23.
• Fair Comfort Index: This index measures the consistency of a stock’s long-term resistance to severe and lengthy corrections. This index compares the individual stock to the fluctuation of the VectorVest Composite price that is measured on a scale of 0 to 2.00. At a level of 1.09, ANET’s rating is slightly above average. Therefore, this stock is suitable for aggressive risk-oriented investors, and certainly not for conservative investors.
• Excellent Growth Rate (GRT):  ANET’s respectable 29% forecasted growth rate is measured over a forecasted three-year period. This fundamental factor is calculated in the VectorVest software, so you don’t have to do the work. The chart below highlights the positive trending earnings.
• Excellent VST Score: The VST Master Indicator ranks 9,139 stocks from high to low and brings to the top of the rankings those stocks with the highest VST scores. ANET’s above-average score is 1.48.  Using VST enables users to identify stocks that are performing much better than average, as well as the opportunity to find the cream of the crop in all its critical criteria with a few mouse clicks. This stock is not yet in that category but could get there going forward after its recent price breakout.

Considering the five “: Excellent” ratings, this stock is certainly one of the “Top 10” creams of the crop in the VectorVest universe, as is rated 4th out of 9,140 stocks. Now would be a good time to place ANET on your watchlist for a potential buying opportunity either after a price pullback or when the next positive MACD crossover occurs, only if the overall VectorVest market signal is rated  “bullish”.

Be aware that the company’s earnings release and conference call for the 2023 first quarter results will occur on May 1, so listen in if you are considering this stock for purchase.  No need to buy early and then take a hit if there are disappointing results...

Before you do anything, make sure that you check out VectorVest’s overall market timing signal to make sure the trend is your friend and sloping upward. And of course, determine whether VectorVest continues to rank this stock as a buy after the earnings release. To check out ANET’s recommendation on May 2 analyze it for free using VectorVest.

Want These Types of Insights at Your Fingertips so You Can Win More Trades?

Use VectorVest to analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.

Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action!