Shares in Arista Networks (ANET) soared on fiscal 2022 revenue growth guidance Tuesday as the company also announced a four-for-one stock split. ANET stock was extended heading into its better-than-expected earnings report for the third quarter.
For the September quarter, Arista earnings per share rose 22% vs. a year earlier to $2.96, topping estimates of $2.73. Revenue grew 24% to $748.7 million, beating forecasts for $738 million.
Santa Clara, Calif.-based Arista sells switches that speed up communications among racks of computer servers packed into data centers. Arista’s primary customers have been internet companies.
ANET Stock: Facebook, Now Called Meta, A Big Customer
For fiscal 2022, Arista forecast revenue growth of 30% as data center orders pick up from Facebook (FB), now called Meta. Arista, a rival of Cisco Systems (CSCO), also expects strong demand in the corporate market.
Needham analyst Alex Henderson said the 30% revenue growth target is do-able. “Part of that upside reflects a 10% price increase going effective imminently in the fourth quarter, but much of it also reflects exceptionally strong supply chain management,” he said in a report.
Arista said it expects $400 million in corporate campus sales next year, up about 100%.
“They raised their picture for revenue growth in 2022 to 30% year-over-year, or roughly $3.7 billion in total sales,” Jefferies analyst George Notter said in a note to clients. “It’s a huge bump up. Prior consensus views called for $3.23 billion.”
ANET stock analysts cautioned, though, that growth will moderate in fiscal 2023 and beyond.
“We expect most upside is already priced in at current levels and remain concerned that long term competition from both white box and other vendors will make its double-digit sales growth difficult to sustain,” Barclays analyst Tim Long said in his note to clients.
Arista Announces Buyback
Also, the computer networking gear maker announced a $1 billion stock buyback program.
Arista stock holds a Relative Strength Rating of 86 out of a best-possible 99, according to IBD Stock Check-up.
“Following Facebook’s plan to grow its capex over 60% next year, it’s clear the wind is at Arista’s back,” ANET stock analyst Simon Leopold of Raymond James said in a note. “Considering the competitive environment and supply chain constraints, this forecast appears aggressive.”
IBD offers a broad range of growth stock lists, such as Leaderboard. Investors also can create watch lists for issues such as ANET stock, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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