Cloud networking services provider Arista Networks Inc (NASDAQ:ANET) is having a very good year. For investors who bought ANET stock last June, make that double good — precisely 100%-plus good.
ANET went public in 2014 and is giving networking’s 800-pound gorilla Cisco Systems, Inc. (NASDAQ:CSCO) a real run for its money, literally as well as figuratively.
It’s somewhat reminiscent of CSCO’s growth path back in the go-go dotcom days when the server market exploded as the Internet’s possibilities were growing in popularity for business and individuals.
CSCO took off until it was laid low when the tech stock bubble burst. Still, there was no doubt that Cisco was still the server company to beat, since it had been able to sell its hardware around the world.
ANET is the next iteration. Cloud computing is now the new online experience and companies that used to worry about their online presence are now just as focused on uploading everything to the cloud. Network World this week described Arista as “one company that has been wildly successful leveraging software innovation.”
What’s the Cloud?
Simply put, instead of keeping massive servers onsite, many companies have uploaded their data to a company that keeps all their data offsite in a server farm. There, employees can access any data they want from wherever they are. The most straightforward example is Alphabet Inc’s (NASDAQ:GOOGL) Google.
Whether you’re on your phone, laptop or desktop, you have access to our email, documents, spreadsheets, whatever. This ease of access is now a top priority for virtually all businesses to enhance in-house and customer-focused productivity.
Since going public in 2014, Arista has grown rapidly. In the past 12 months ANET stock is up 115%.
Much of the reason for this is it not only provides cloud servers but the software that allows the servers to be far more productive by automating certain tasks.
CSCO has seen the threat to its dominance from this upstart and looked to slow ANET down by launching a lawsuit against ANET saying it infringed on CSCO patents.
While the case wound through the courts, CSCO wanted Arista to stop using the patents in question, which of course would seriously hurt ANET’s business. This has the effect of making the stock less desirable and the products more questionable.
But recently, Arista won two suits Cisco lodged against it. With many big tech firms that are under threat by newcomers, the first attempt is to outcompete them. If that fails, it may be to buy them. If that fails, you take them to court.
All those options have yielded CSCO nothing in this case and ANET is now at all-time highs. With a market cap around $11 billion, it’s still an order of magnitude smaller than CSCO. But it’s proving itself to be a new player in the space with some serious proprietary tech.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.