Arista Stock Is Trading 22.0% below Its 52-Week High


Jun. 7 2019, Updated 12:36 p.m. ET

Stock returns

High-growth tech stocks have been creating massive wealth. Investors need to enter the stocks at the right time due to volatility. As a result of high revenue and earnings growth, the stocks usually trade at a premium. In this series, we’ll discuss tech stocks that have high growth potential. Most of the stocks have risen significantly in the first four months of 2019. However, several of the stocks have fallen since the beginning of May.

Arista Networks (ANET) shares have fallen 17.6% since the beginning of May. Despite the recent pullback, the shares have risen 22.0% year-to-date. Arista stock is trading at $257.18, which is 23.0% below its 52-week high of $331.27.

Arista shares fell after the company announced its sales guidance for the second quarter. Arista expected sales between $600 million and $610 million in the second quarter—below analysts’ estimates of $639 million. The escalating trade war and resulting uncertainty drove Arista’s share price lower.

Arista continues to grow its sales at a strong rate. The company is expected to increase its revenues 19.5% to $2.57 billion in 2019 and 19.6% to $3.07 billion in 2020.

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Is Arista stock attractive for investors?

Arista stock has a forward PE ratio of 24.1x. Analysts expect the company’s earnings to expand 17.5% in 2019, 13.9% in 2020, and 17.3% annually in the next five years.

Arista shares appear to be overvalued by at least 25.0% considering the PE ratio. However, as we stated earlier, high-growth companies usually have higher valuations. We’ll have to see if Arista stock continues to rise and create substantial wealth for investors.

Analysts’ target price

Among the 25 analysts tracking Arista Networks, 16 recommended a “buy” and nine recommended a “hold” for the stock. There weren’t any “sell” recommendations for Arista. Analysts have a 12-month average target price of $307.62, which indicates that Arista stock is trading at a discount of 19.5% to the average estimate.


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