By Senad Karaahmetovic
Needham & Company analyst Alex Henderson upgraded shares of Arista Networks (NYSE:ANET) to Buy from Hold with a $128 per share price target.
The analyst described ANET as “one of the most insulated” stocks from macro pressures in the sector with a heavy focus on Cloud.
The backbone of the upgrade call is the fact that ANET is gaining market share in Enterprise and its software is growing faster than the company.
“Its core customers Microsoft (NASDAQ:MSFT) and Facebook/Meta (NASDAQ:META) are spending aggressively to support their cloud infrastructures and longer-term plans… Arista has a relatively low exposure to cautious international markets, and we think they are finally gaining traction in Tier 1 Service Providers including a win we are picking up at AT&T (NYSE:T),” Henderson said in a client note.
Moreover, the analyst expects ANET stock to continue to feel support from share buybacks. Henderson also took note of “superb” cash flow and 37%+ operating margins, as well as “a pristine fortress Balance Sheet.”
Finally, ANET stock is seen as a must-have portfolio holding in an environment dominated by the weakening economy and softer international markets.
“Arista is exactly the type of name investors are likely to gravitate to in an uncertain market, we believe. We look for Arista to deliver solid growth even if the economy slows. Its international exposure is low with much of its international sales coming from Cloud customers,” Henderson concluded.
Arista Networks shares are up over 2% today.