Celebrations may be in order for Arista Networks, Inc. (NYSE:ANET) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The stock price has risen 7.9% to US$131 over the past week, suggesting investors are becoming more optimistic. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
After this upgrade, Arista Networks’ 25 analysts are now forecasting revenues of US$5.2b in 2023. This would be a huge 33% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 24% to US$4.71. Prior to this update, the analysts had been forecasting revenues of US$4.7b and earnings per share (EPS) of US$4.00 in 2023. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Check out our latest analysis for Arista Networks
With these upgrades, we’re not surprised to see that the analysts have lifted their price target of 7.8% to US$155 per share. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Arista Networks at US$203 per share, while the most bearish prices it at US$118. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It’s clear from the latest estimates that Arista Networks’ rate of growth is expected to accelerate meaningfully, with the forecast 26% annualized revenue growth to the end of 2023 noticeably faster than its historical growth of 14% pa over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.2% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Arista Networks is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. They also upgraded their revenue estimates for next year, and sales are expected to grow faster than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Arista Networks.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Arista Networks going out to 2024, and you can see them free on our platform here..
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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