Tech Strikes Back — And Cloud Computing Leader Arista Ascends Toward Buy Point

As tech stocks like Nvidia (NVDA) and Mobileye (MBLY) find favor again after an abysmal 2022, cloud computing leader Arista Networks (ANET) ascends toward a new breakout. ANET stock now floats just below a new buy point with Q4 earnings due Feb. 13.


The Nasdaq “power trend” lifting MBLY and NVDA stock in the new year remains intact, although the tech-heavy index hit resistance at 12,000.

Arista joins Nvidia and Mobileye are trying to show resilience while the market encounters what some think will be just a minor speed bump. All three stocks closed down for the day but off their lows.

With the highest-possible 99 Composite Rating, Arista holds the No. 1 spot in the Computer-Networking industry group. Eight consecutive quarters of rising fund ownership point to institutional demand. Plus, 39 funds with an A+ rating from IBD have a position in ANET stock.

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Next-Gen Switching Lifts Cloud Computing Leader

Based in Silicon Valley, Arista Networks pioneered software-driven, cognitive cloud networking for large-scale data center and campus environments. The network solutions leader empowers clients with tools to ensure availability, agility, automation, analytics and security.

At the core of Arista’s platform is the Extensible Operating System. EOS is  a groundbreaking network operating system. Its modern open core architecture enables in-service upgrades and other advantages.

Arista has shipped more than 50 million cloud networking ports worldwide with CloudVision and EOS.

In December, Arista revealed next generation switching for compute and storage. It marked an expansion of Arista’s widely deployed 7050X4 Series, providing longevity and investment protection for enterprise compute and storage, co-location providers and managed services providers. The company also released complementary products that double the capacity of hyperscale backbones while reducing space and power per gigabit.

Arista noted that both traditional enterprise and hyperscale cloud are in the midst of compute and storage refresh cycles, fueling demand for higher-speed networks.

Arista Posts 4 Straight Quarters Of Accelerating Growth

Arista Networks has generated four straight quarters of accelerating earnings and sales growth, helping it earn a spot on the IBD 50 and IBD Big Cap 20.

Arista’s Rising Growth
QuarterEPS ($)% ChgSales ($ Mil)% Chg

When the company reports Feb. 13, analysts expect 48% earnings growth for Q4 and a 53% EPS increase for 2022. Continuing its strong and steady gains, Wall Street forecasts 25% growth this year.

With sales growth averaging 17% over the last three years, Arista spots an “A” SMR Rating, which tracks sales growth, profit margins and return on equity.

Showing how efficiently it operates, Arista sports an annual pretax profit margin of 38.9%, a 25.1% annual return on equity and has essentially zero debt.

ANET Stock Looks To Join NVDA And Break Out

By virtue of not going public until October, Mobileye escaped most of the damage done to tech stocks last year. Now featured on the IBD 50 and IPO Leaders, the maker of autonomous driving technology returned to the public markets after being bought then sold by Intel (INTC) in 2017. MBLY stock has about doubled since its IPO and remains near a new high.

Both Arista and Nvidia show the bear market scars in their stock charts.

ANET stock is once again challenging long-term resistance around 140 as it closes in on a 140.91 buy point in a cup pattern. Its relative strength line is trending toward a new 52-week high as Arista trades well above its 10-week moving average.

After nearing the new entry, Arista retreated as the Nasdaq also fell Friday. In a positive sign, volume on ANET’s decline was in light volume, much lower than in prior heavy-volume up days in recent weeks.

Meanwhile, NVDA stock rose sharply after clearing a 188 buy point in a cup base of its own. Upside volume on the move has been strong, confirming demand. Nvidia reports earnings on Feb. 22 as it tries to shake off new pressure in market indexes. The stock managed to come off its Friday lows.

While earnings season and inflation concerns remain, the rebound in tech and growth stocks like Arista, Mobileye and Nvidia bodes well for the stock market if the indexes can weather its current stumbles.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.


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