Arista Networks Plunges 4.54%: What's Behind the Sudden Selloff?

Summary
• CEO Jayshree Ullal offloaded 588,000 shares in a single day
• Evercore ISI downgraded ANET to 'Outperform' citing valuation concerns
• Stock trades at 11% below its 200-day moving average of $153.72

Arista Networks (ANET) is reeling from a 4.54% intraday drop to $117.62, hitting a 52-week low of $115.44. The selloff follows a cascade of insider sales, analyst skepticism, and technical overbought conditions. With the Communication Equipment sector mixed and Cisco Systems (CSCO) down 1.5%, investors are scrutinizing whether this is a buying opportunity or a deeper re-rating.

Insider Selling and Analyst Downgrades Trigger Sharp Selloff
The immediate catalyst for ANET’s 4.54% plunge was a series of high-profile insider transactions. CEO Jayshree Ullal sold 588,000 shares on July 29th at $119.15 and 527,302 shares on July 28th at $115.59, representing an 8.78% reduction in her holdings. These sales, coupled with a 7.85% stake reduction by the same executive just a day earlier, sent shockwaves through the market. Meanwhile, Evercore ISI downgraded ANET from 'Tactical Outperform' to 'Outperform,' citing valuation concerns despite the stock’s 20% outperformance over the past month. The firm noted a 'balanced risk/reward' ahead of earnings but acknowledged the 52.8 P/E ratio and 21.55 P/S ratio are stretched compared to historical averages.

Communication Equipment Sector Mixed as ANET Faces Short-Term Pressure
The Communication Equipment sector, led by Cisco Systems (CSCO) at -1.5%, has shown mixed performance. While ANET’s 4.76% decline outpaces the sector’s average, the broader market remains optimistic about AI infrastructure demand. However, ANET’s premium valuation metrics (P/E 52.8 vs. sector average 32.1) and insider selling activity highlight a divergence in investor sentiment. The sector’s 4.5% CAGR in 2024-2030, driven by 5G and AI, offers long-term tailwinds but may not offset near-term profit-taking.

Options and ETFs for Navigating ANET’s Volatility: Key Levels and Positioning
• RSI: 84.15 (overbought)
• MACD: 5.85 (bullish), Signal Line: 4.99
• Bollinger Bands: Upper $123.16, Middle $111.03, Lower $98.89
• 200D MA: $153.72 (far above current price)

ANET’s technicals suggest a short-term bearish bias, with key support at $111.03 and resistance at $123.16. The stock is trading 11% below its 200D MA, indicating a potential oversold scenario. For aggressive positioning, consider the following options:

• ANET20250808P115 (Put, $115, Aug 8):
- IV: 91.63% (high volatility)
- Delta: -0.394 (moderate sensitivity)
- Gamma: 0.024 (price sensitivity to movement)
- Theta: -0.1045 (slow time decay)
- Turnover: $21,157 (high liquidity)
- Leverage: 24.39%
High IV and leverage make this put ideal for a 5% downside scenario (ST = $111.48), yielding a $3.52 payoff per contract.

• ANET20250808P117 (Put, $117, Aug 8):
- IV: 84.33% (high volatility)
- Delta: -0.443 (moderate sensitivity)
- Gamma: 0.0268 (price sensitivity to movement)
- Theta: -0.049 (slow time decay)
- Turnover: $95,731 (extremely liquid)
- Leverage: 22.36%
Aggressive bears should consider ANET20250808P115 into a break below $115, while ANET20250808P117 offers liquidity and leverage for a deeper correction.

Watch for $111.03 support breakdown or a positive earnings surprise to trigger a reversal.

Backtest Arista Networks Stock Performance
The backtest of ANET's performance after a -5% intraday plunge shows favorable short-to-medium-term gains. The 3-Day win rate is 57.83%, the 10-Day win rate is 62.10%, and the 30-Day win rate is 72.06%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest period was 14.31%, which occurred on day 59, suggesting that there is potential for significant gains following the intraday dip.

Arista Networks at Crossroads: Watch for $111.03 Support Breakdown
Arista Networks faces a critical juncture as short-term volatility clashes with long-term AI infrastructure demand. The stock’s 4.54% drop has created an oversold scenario, but insider selling and stretched valuations persist. Key levels to monitor include $111.03 (Bollinger Band) and $123.16 (resistance). The sector leader, Cisco Systems (CSCO), is down 1.13% today, signaling broader caution. Investors should watch for a breakdown below $111.03 or a positive earnings surprise to confirm a reversal. For now, the path of least resistance appears downward, but oversold conditions and a Zacks Rank 1 'Strong Buy' rating hint at a potential rebound. Aggressive bears may consider ANET20250808P115 into a break below $115.