Arista stock fell over 20.0% in May
Shares of high-growth networking company Arista Networks (ANET) fell 21.7% in May 2019. In the first three months of this year, ANET rose an impressive 51.0%. At that point, Arista had to justify its spectacular bull run to support its price rise. Sadly, it failed to do so.
ANET announced its first-quarter earnings results on May 2 and reported sales of $595.4 million with adjusted EPS of $2.31. ANET’s sales rose 26.0% YoY (year-over-year), while its EPS rose 29.0% YoY in the quarter. The company beat analysts’ estimates of sales of $594.87 million and EPS of $2.07.
Though ANET beat analysts’ estimates, its stock fell driven by its less-than-impressive guidance. ANET forecast sales of $600 million–$610 million for the second quarter, below Wall Street’s estimate of $639 million.
Tariff war escalation
ANET stock was also affected by the escalation of the trade war between the US and China. On May 13, the broader market fell as China retaliated against tariffs imposed by the US. In early May, President Donald Trump threatened to increase tariffs on $200 billion worth of Chinese goods and to impose new tariffs on goods worth $300 billion.
China (FXI) then retaliated and increased tariffs on US goods worth $60 billion. Though China doesn’t account for the majority of ANET sales, the company isn’t immune to the effects of the trade war. The Asia-Pacific region accounts for less than 10.0% of Arista’s total sales, but it’s the company’s fastest-growing market.