On Friday, Goldman Sachs (NYSE:GS) maintained a Buy rating on Arista Networks (NYSE:ANET) stock with a steadfast price target of $135.00. The stock, currently trading near its 52-week high of $120.28, has delivered an impressive 90% return over the past year.
According to InvestingPro analysis, which offers 17+ additional investment insights, the company maintains robust financial health with an overall score of "GREAT." The firm's confidence in Arista Networks is bolstered by the company's potential for significant revenue growth and its leadership position in the AI networking sector.
Analysts at Goldman Sachs project more than 20% top-line growth for Arista in 2024, with an estimated increase of 22%, and an even stronger performance in 2025 with an anticipated 25% growth. This projection builds upon the company's strong historical performance, with revenue growing 18.19% over the last twelve months to $6.61 billion.
The optimism from Goldman Sachs is partly due to the latest industry data from the 650 Group, which shows Arista's continued dominance in AI networking. Additionally, advancements in major AI cluster projects are expected to favor open systems, which typically utilize Ethernet and align with Arista's offerings. The firm also notes the ongoing upward revisions in cloud capital expenditures, which further support Arista's growth trajectory.
Goldman Sachs expects Arista Networks to meet its ambitious $750 million AI revenue target by 2025, with substantial growth prospects beyond that year. This outlook is supported by the company's involvement in five major cloud cluster projects that are poised for expansion. Arista's historical performance adds to this confidence, as the company has consistently surpassed EBIT margin guidance, beating the midpoint by approximately 270 basis points on average over the past 27 quarters.
Looking ahead, Arista Networks is anticipated to reiterate its 2025 forecasts, which includes 15-17% revenue growth, 60-62% gross margins, and 43-44% EBIT margins. Goldman Sachs sees potential for even higher results given the current momentum in AI networking.
For deeper insights into Arista's valuation and growth prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro, which provides detailed analysis of the company's financial health, growth trajectory, and market position among 1,400+ top stocks.
In other recent news, Arista Networks announced a four-for-one forward stock split, aiming to enhance the liquidity of their shares in the market. The company also reported a 20% year-over-year increase in Q3 revenue, reaching $1.81 billion and exceeding forecasts. Non-GAAP earnings per share also saw a significant rise, hitting a record $2.40, a 31.1% increase from the previous year.
Citi reaffirmed its preference for Apple (NASDAQ:AAPL) and Arista Networks as the leading shares in its coverage group, citing a positive outlook on the networking equipment sector. Arista Networks remains a favorite for Citi among the companies in its coverage, due to its focus on cloud networking solutions and strong market presence.
Meanwhile, Atlassian (NASDAQ:TEAM) Corporation reported a 31% surge in cloud revenue, surpassing expected growth of 27%. This was primarily driven by the successful integration of AI capabilities across its cloud platform and robust sales execution. Macquarie initiated coverage on Atlassian with a Neutral rating, highlighting the company's conservative guidance as a potential source of near-term revenue and earnings per share upside.
These are recent developments that highlight the strategic moves and financial performances of both Arista Networks and Atlassian Corporation. Piper Sandler expressed heightened investor interest in Cloudflare (NYSE:NET) and ServiceNow (NYSE:NOW), among others, following an Infrastructure Software (ETR:SOWGn) Bus Tour. The firm reported a generally positive sentiment from these companies regarding potential macroeconomic improvements and opportunities in AI.
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