Arista Networks (ANET)

Arista Networks (ANET)

Summary:  ON SALE

Score:  15/20
MOS:  95%
Share Price:  $275
Sticker Price:  $3,000+

Is Arista Networks stock a good buy?

Arista Networks is an American computer networking company founded in 2004 and headquartered in Santa Clara, California. They design and sell network switches to deliver software-defined networking (SDN) solutions for large data center, cloud computing, high-performance computing, and high-frequency trading environments.

On the surface, Arista is perceived as a very boring business.  Who likes to talk about 7800R3 Series Universal Networking Modules?  Seriously, it sounds like a foreign language.

You’re probably familiar with the term “cloud computing”.  To give you a little context, before cloud computing was a thing, companies (large and small) would build server rooms within the structure of an office building.  A server room is exactly what is sounds like.  It’s a room filled with servers, cables, and fans.  The issue is, managing server rooms is expensive and risky.  If a building were to experience fire or water damage, thus impacting the server room, the entire company could lose data and valuable information.  In some cases, this could cripple a company.

Cloud computing was created to solve this problem.

Here are a few of the top players in the market…

  • In 1998 Rackspace was created
  • In 2006 Amazon created AWS (Amazon Web Services)
  • In 2008 Google created Google Cloud
  • In 2010 Microsoft created Azure

Cloud computing allows companies to move away from the risks of an on-premise server room and pay an external company to host and secure all data.

A few of the benefits of cloud computing include…

  • Cost Savings
  • Security
  • Flexibility
  • Mobility
  • Insight
  • Increased Collaboration
  • Quality Control
  • Disaster Recovery
  • Loss Prevention
  • Automatic Software Updates
  • Competitive Edge
  • Sustainability

One of the biggest benefits not listed above is REDUNDANCY.  Here is how this works…

A company like AWS will setup Data Centers all over the world.  For this example, I’ll use Netflix.  Netflix will host all of it’s data on AWS and that data will be saved in multiple locations around the world at the exact same time.  This way, in the event of a fire, hurricane, earthquake, etc, the data is redundantly saved around the world.  This is why it’s called “cloud computing” giving the perception that the data is in the cloud.

The reality is, the data is saved in physical data centers.

The question is, who supplies the tech that goes into these data centers?

That’s where Arista comes in.

Good news for Arista, new data centers are expected to be built and current data centers are expected to be upgraded.  This article from Reportedtimes.com states the data center switch market is expected to hit big revenues in the future.  In other words, companies are growing and need more servers to contain their data.

It’s also important to note, some of Arista’s customers include Amazon (AWS) and Microsoft (Azure).  These are the two biggest hosting platforms on the market.

At times like these, investors can be attracted to flashy growth stocks like TSLA and NIO.  Those stocks are interesting and have the potential for high growth.  At the same time, the financials are in rough shape and the slightest bit of bad news in a quarterly report could cause those stocks to fall drastically.  TSLA has experienced this several times before.  Be careful if you own those stocks.

I respect some growth stocks like TSLA but I prefer more conservative investments.  Arista is a perfect example of a more conservative play.

In 2017, Arista’s share price was $89.

In 2020, Arista’s share price hit $277.

That’s a total return of 211% and an annualized return of 46% over 3 years.  Not too bad.

With a score of 15/20, the financials are looking pretty good.  With a MOS of 95% (Share Price of $275 vs Sticker Price of $$3,000+) this stock has some impressive upside potential.

The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.