1. Arista Networks, Inc. (NYSE:ANET)
Short Interest as % of Shares Outstanding: 0.66%
Number of Hedge Fund Holders: 65
Arista Networks, Inc. (NYSE:ANET) is a prominent provider of cloud networking solutions and focuses on high-performance Ethernet switches and software tailored for extensive data centers and campus settings. The company is also a significant contributor to the 5G ecosystem, as it offers essential infrastructure that facilitates the deployment and functioning of 5G networks.
It provides high-speed networking platforms to leading telecom operators like SK Telecom, who use the company’s technology to develop resilient and scalable data center networks that can manage the increased data traffic associated with 5G services.
Among the company’s offerings designed for 5G networks and infrastructure are the Ethernet Universal Spine and Leaf Network Switches, the Extensible Operating System which streamlines network operations and ensures a uniform operational model across different platforms, the multi-domain management platform Arista CloudVision, and 5G Edge Solutions, among others. It tops our list of the best 5G stocks to buy according to short sellers.
Arista Networks (NYSE:ANET) stands to gain significantly from the ongoing expansion of 5G technology and the growing reliance on cloud services. As a key player in networking infrastructure, the company is benefiting from several industry trends, including the increasing number of data centers and the rise in internet-connected devices. This positions it favorably in the market, especially with its recent advancements tailored for AI applications.
The company’s new 7060X6 Etherlink AI networking platform is a great example as it is designed specifically to handle intensive artificial intelligence workloads. This platform facilitates the connection of multiple computer-processing units, which addresses a major challenge in the AI industry related to data processing. The company’s expertise in data center technology, particularly for AI, strengthens its role in the expanding AI data center market.
In its latest earnings report for Q2, the company achieved a revenue increase of 15.9% and a remarkable 29.5% rise in adjusted operating profits, surpassing market expectations. In light of the strong performance, on July 31, Jefferies analyst George Notter raised the price target on Arista Networks (NYSE:ANET) to $380 from $340 and kept a Buy rating. Notter’s optimism is supported by the company’s continued success in securing major AI and cloud networking trials. The company has won four out of five significant trials, with the potential for a fifth, possibly with Microsoft Corporation (NASDAQ:MSFT), as per the firm. This development suggests it could replace some of the existing InfiniBand solutions at Microsoft.
The company has set its revenue guidance for the upcoming quarter between $1.72 billion and $1.75 billion. This forecast represents an approximate 17% increase compared to the previous year, which signifies its growing presence in the AI hardware sector and its potential for continued success in the evolving tech landscape.
Arista Networks (NYSE:ANET) was part of 65 funds’ portfolios and the total stake value was $1.9 billion in the second quarter. As of Q2, Polar Capital is the top shareholder in the company and has a position worth $287.162 million.
Artisan Partners stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its Q2 2024 investor letter:
“Notable trims in the quarter included Chipotle and Arista Networks, Inc. (NYSE:ANET). Arista Networks is the market leader in cloud networking equipment used in data centers. Shares have experienced strong outperformance since the beginning of 2023 due to its ethernet options being well positioned to capture market share in AI cloud environments (more scalable and cheaper than InfiniBand, an out-of-the-box solution by Nvidia). Similar to Chipotle, after a period of strong performance, we trimmed the position based on valuation and market cap.”
While we acknowledge the potential of Arista Networks, Inc. (NYSE:ANET) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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