Arista Networks (NYSE: ANET) ended the week on a strong note, with its shares significantly outperforming the market on Friday. The stock surged by almost 5% following an analyst upgrade, surpassing the 1.3% increase of the S&P 500 index.
Upgraded to buy
Jefferies’ George Notter, the individual behind Arista’s upgrade, has now designated the stock as a buy with a target price of $320 per share, a significant increase from his previous hold rating at $240.
Notter’s rationale is straightforward and pragmatic. In his latest research note on the networking company, he emphasized the extraordinary surge in spending on cloud computing, a trend that aligns well with Arista’s core strengths.
This surge in spending is largely driven by the soaring popularity of artificial intelligence (AI). Across various industries, companies are exploring the vast potential of AI and preparing to integrate it into their operations. Given AI’s sophisticated requirements for processing power and storage, there are substantial opportunities for companies like Arista to capitalize on.
Double-digit growth expected for the first quarter
We’ll gain further insight into how this trend is impacting Arista next week when the company is set to release its latest earnings report on Tuesday, May 7. Analysts anticipate robust growth, with an average expectation of a 22% year-over-year increase in per-share net income to $1.74, supported by a 19% rise in revenue to $1.55 billion.
