Morgan Stanley: Arista Networks (ANET.US) sees stronger growth in its data center business, raises target price to $410

Zhitong Finance learned that Morgan Stanley analysts reiterated their buy rating on Arista Networks (ANET.US) and raised the target price for the networking solutions company to $410 from $355. Morgan Stanley said that as Ethernet continues to take market share from Infinite Broadband, Arista's momentum in the cloud and data center networking space is continuing to strengthen. Morgan Stanley analysts Meta Marshall and Mary Lenox said in a Thursday investor report: "We believe that Arista's valuation of ~39x its 26F EPS is not cheap, given the high buyer's valuation. However, these data points are encouraging as there are multiple growth paths and Arista has the opportunity to take share from Infinite Broadband in the Ethernet space." Arista has shown stable growth this year, with its stock price more than doubling in the past 12 months. The stock hit a record high of $416.93 on October 11. The networking company also locked in several major cloud customers this year due to the need for larger, more complex data center configurations for artificial intelligence applications. The company recently began its fifth major cloud customer of the year on a trial basis. It is also working with Meta (META.US) on a 100,000 GPU cluster. Marshall noted: "We believe the next major catalyst for Arista will be seeing the 100K Meta cluster shift to deployment/revenue. However, the timing remains uncertain, dependent on cloud customer bottlenecks in owning facilities/power/labor/specialization." Arista plans to announce its third-quarter 2024 financial results after the close of the U.S. stock market on November 7. Analysts generally expect the company's adjusted EPS to be $2.08 and revenue to be $1.76 billion in the quarter ended September 30.