picked up a pair of rating upgrades on Friday, just ahead of the company’s September quarter earnings release on Monday.
For the quarter, the networking hardware company has been projecting revenue of $570 million to $590 million, non-GAAP gross margin of 63% to 65%, and non-GAAP operating margin of 37%. The Wall Street analyst consensus revenue forecast is smack in the middle of the guidance range at $581 million; the consensus profit estimate is $2.61 a share.
Morgan Stanley analyst Meta Marshall on Friday raised her rating on Arista (ticker: ANET) to Overweight from Equal Weight, with a new price target of $250, up from $230. Marshall writes in a research note that she has “increased confidence” in Arista’s ability to maintain market share as large-scale cloud customers adopt 200 gigabit and 400 gigabit networking hardware. She contends that Arista is “best positioned” to deliver on the requirements of the “hyperscale” cloud players.
“The overhang on Arista heading into the 200G/400G cycle has been in potential share loss,” she writes. “Our diligence points to less risk of competitive insertion than a quarter ago, making us more comfortable that risk is overdone. With increased confidence in share preservation, we see timing of upgrades, even with risk of some pushouts, ultimately setting up for upside to expectations through fiscal 2021.”
She adds that “recovering enterprise activity” could help as well.
Looking toward Monday’s earnings report, she says that “improved tone and messaging from management around the opportunity could be taken positively, particularly as 200G upgrades are expected to begin in some form of scale in the [December or March quarters]. Even if not implicitly built into guidance when provided, an improving outlook toward growth opportunity should garner some investor confidence.”
Marshall adds: “With most scenarios for Arista pointing to upside to our expectations over the next 12 to 18 months, we see an attractive opportunity to step into the name ahead of what we expect to be an improving outlook.”
MKM Partners analyst Fahad Najam, meanwhile, also elevated his rating on the stock to Buy from Neutral on Friday, setting a $225 price target. Najam’s logic is similar to Marshall’s, pointing to a significant opening in hyperscale data center switching, as well as a growing opportunity in campus networking.
On Friday, Arista was up 1.3%, to $205.79.
Write to Eric J. Savitz at email@example.com