Among the most important phenomena of the past 20 years has been the move toward cloud computing. Established in 2008, Arista Networks (NYSE:ANET) has earned its reputation as a leader in data-driven, client-to-cloud networking. Since the company went public in June 2014, ANET stock’s ascent has reflected the growth of the broader cloud-computing market.
This is a company which not every investor will know, but that’s perfectly fine. Arista may be an under-the-radar opportunity to take a position in an expanding business.
Some of that expansion has resulted from acquisitions. Last year, Arista acquired traffic monitoring and visibility platform Big Switch Networks as well as network detection and response (NDR) facilitator Awake Security.
There’s a lot to unpack with this exciting company. So, let’s start off with the basics: a quick look at how ANET stock has performed in 2021 so far.
ANET Stock at a Glance
It’s definitely fair to say that Arista’s long-term investors have enjoyed steady returns. Despite tech hardware shortages around the world, investors evidently still have conviction in this company.
ANET stock started 2021 at around $70. By the summer, however, the stock was already preparing to break above the key $100 level.
After taking a breather, which is perfectly normal and expected, the stock jumped to $130 in early November. However, there was a quick pullback in the month’s final days.
The late-November drawdown in ANET didn’t seem to be the company’s fault. Most likely, it was due to a broad-market sell-off in the wake of the Covid-19 Omicron variant’s emergence.
Next, we should observe that Arista’s trailing-12-month price-earnings ratio (P/E) is 50.06. Some value-focused investors might consider this P/E ratio to be slightly elevated, but not out of control by any means.
Finally, we should note that Arista recently enacted a one-for-four share split. This should make ANET stock more alluring to prospective shareholders as the stock will now be more affordable.
Double the Performance
Since Arista develops and manufactures cloud-centered hardware, it’s essential for the company to continually release newer, better products.
Practically, all tech-product companies do this to some extent. However, it’s not every day that they manage to double the performance of a major product.
Just recently, Arista announced the next generation of its popular 7050X and 7060X Series cloud-networking architecture, designed for enterprise and cloud customers as they transition to 400G networks.
Reportedly, the new 7060X5 and 7388X5 can double the performance of the 7060X4 and 7368X4. Furthermore, the 7060DX5-64S is said to deliver 10.6 billion packets per second (Bpps) and can be viably utilized in 100G, 200G and 400G environments.
Arista’s Chief Operations Officer Anshul Sadana conveyed the robust demand for the latest iterations of these products.
“We are seeing customers of all sizes show interest in the next generation of 400G systems that provide incremental improvements without sacrificing backward compatibility,” Sadana observed.
Navigating a Difficult Environment
All right, enough tech stuff for now — let’s get to the financial stats which prospective investors will want to analyze.
Arista’s slightly elevated P/E ratio may be easier for value investors to accept if the company is posting strong revenue growth. So, let’s see how Arista is doing in that area.
According to the company’s third-quarter 2021 financial data, Arista’s revenues totaled $748.7 million. This represents a quarter-over-quarter increase of 5.8%.
It’s also a year-over-year improvement of 23.7% — not too shabby.
Not only that, but Arista also reported third-quarter 2021 GAAP net income of $224.3 million. That’s a sizable increase compared to the $168.4 million of GAAP net income the company generated in 2020’s third quarter.
With that in mind, Astra’s Chief Financial Officer Ita Brennan celebrated the company’s ability to overcome a well-known hurdle in 2021.
“The business continued to perform well in the quarter, exceeding on all key financial metrics, while the team navigates a difficult supply environment,” Brennan explained.
The Takeaway for ANET Stock
Clearly, tech-component shortages aren’t stopping Arista from generating strong revenues.
At the same time, the company continues to develop next-generation products for Arista’s cloud/enterprise clients.
Therefore, investors don’t have to fret over the valuation of ANET stock. I give the stock a “B” in my Portfolio Grader.
There could still be room to run as Arista pushes the cloud-tech envelope and has the fiscal results to show for it.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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