What’s Happening With Arista Stock?

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Despite posting impressive quarterly results, Arista Networks (NASDAQ: ANET) saw an unexpected market reaction. The company delivered solid numbers with sales reaching $2.0 billion (up 27.6% year-over-year) and adjusted earnings of $0.65 per share (up from $0.50 last year). Both figures beat Wall Street expectations of $1.97 billion in sales and $0.59 EPS.

Adding to the good news, Arista’s Q2 outlook of $2.1 billion exceeded consensus estimates, and they announced a $1.5 billion share buyback program. Normally, these would be ingredients for a stock rally, but instead, ANET dropped 5% in after-hours trading. Clearly, ANET stock is volatile, and if you are looking for potential upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and delivered returns exceeding 91% since its inception. Separately, see – What’s Next For HIMS Stock After A Solid Q1?

So what happened? Investors were clearly hoping for even more, especially considering major tech companies have maintained their AI-related capital expenditure plans.
The question now: Does it make sense to buy ANET at $86 (after-hours price)? We think absolutely.

At $86 (after market), ANET trades at 15x trailing revenues, just slightly above its three-year average P/S ratio of 14x. We believe a higher valuation multiple is justified given Arista’s strong position in the AI space, with companies like Meta, Microsoft, Oracle, and Google making up a significant portion of sales while remaining committed to AI expansion. With sales growth projected in the high teens over the next few years, the premium valuation makes sense.

Bottom line: Investors should consider using this dip in ANET stock as an opportunity to buy for solid long-term gains. For investors aiming to reduce the inherent volatility associated with individual stocks like Arista Networks, there are alternative investment strategies available. The Trefis RV strategy, which has a history of outperforming its all-cap stock benchmark, provides a diversified approach to potentially achieve solid returns. Likewise, the High-Quality portfolio has shown superior performance compared to the S&P 500 with returns that exceed 91% since its initiation, offering potential upside with reduced stock-specific risk.