Arista Networks Stock Has Doubled In the Last Year - Is Management Planning A BIGGER Move Next?

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In this episode of Chip Stock Investor, Nick and Kasey discuss the recent performance and future prospects of Arista Networks (ANET). The company is known for its design of networking hardware for data centers and internet infrastructure - the highways and freeways that data travels on.
Arista Networks' stock has doubled in the past year. AI has lent a big helping hand, and its market share continues to grow at the expense of Cisco. Despite a predicted slowdown in growth in 2024, the company continues to show strong performance, and high profit margins. There is also a growing amount of cash on the balance sheet, and with no share repurchases last quarter, could Arista be planning something big?
Stay tuned later this week for updates on Cadence Design Systems (CDNS), Albemarle (ALB), and Lattice Semiconductor (LSCC)! Our show notes are available on our Ko-Fi shop, and consider joining our membership for more perks accessed via Discord.
00:05 Introduction to Arista Networks
01:12 Understanding Arista Networks' Business Model
02:27 Arista Networks' 2023 Performance Review
03:46 Arista Networks' Key Partnerships and Customers
04:36 Arista Networks' Business Evolution and Differentiators
07:04 Arista Networks' 2024 Outlook
10:00 Speculations on Arista Networks' Future Moves
12:59 Investment Considerations for Arista Networks
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Nick and Kasey own shares of Arista Networks

[@DennisFinancialDoctor]

I've been long ANET. Returns have been phenomenal but I also feel there is so much more to grow. I project Arista to overtake Cisco's market cap which means much more returns.

[@tomasnunes4831]

I sold it when it fell at a slight loss. Lesson learned, never own an individual stock if you aren't familiar with it. Id rather buy a semiconductor etf as I believe in AI and use AI for work as a surgeon . I'm just not equipped with the knowledge to individually manage a stock.

[@SM-fs7db]

Thank you for the analysis. I appreciate the in-depth coverage.

[@chipstockinvestor]

Our pleasure!

[@geordiehawkins7372]

Thanks for the earnings update and info on the company. I was able to start a position in ANET last year and have been looking to add when the opportunity is there.

[@kristinjimenez1342]

I appreciate the research and time you take to delivery this information. I especially like, and better understand, the style of your presentation. Keep up the great work!

[@chipstockinvestor]

Thanks Kristin, glad you find it helpful!

[@GrindThisGame]

Small dividend would be a nice addition.

[@missunique65]

fantastic analysis

[@sibasispanda8948]

Thanks for all the amazing content that you upload. I can only imagine the amount of research and hard work that goes into these videos.

[@naumansulaiman8856]

Thank you!!

[@jtjt376]

Love it. thank you!

[@user-sm9ms6yw9p]

Thanks you

[@riffsoffov9291]

Thanks for the video. I've been very slow at understanding the unified platform Arista has. I've heard that Cisco has some good bits but they aren't joined up. There's a piece on Cisco's IR from June '23, about a vision to "create a simpler network management platform experience to help customers easily access and manage all Cisco networking products from one place". I don't know how well that's going, but if they'd made a lot of progress already I think I'd probably have heard about it. I'm guessing there could be problems when you allow independent operations for years and then decide it all needs to be joined-up. There's also how well you can mix Cisco's products and services with other stuff, but I've nothing to add about that.

[@chipstockinvestor]

Basically, Cisco is a big giant mess! The are plenty of better stocks to own for a reasonable price, in our opinion

[@bethhynes787]

I really enjoy your analysis- would you consider analyzing the semi-focused ETF’s?

[@chipstockinvestor]

We have discussed those a number of times in videos. Not much to analyze. The two ETFs are both focused on large cap semiconductor stocks, and are a good proxy for the industry overall. They have similar performance over the long term.

[@MichaelTaylor-nm6cx]

Hi Nick! I just noticed that per the IBD website, % management ownership has dropped from 18.99 pct down to 3.54. Yikes? Some light google searching confirms that yes, insiders have been selling (including a co-founder?). Any concerns here? Are we aware of any new competitors or risk that have emerged? Thanks for all that you all do for us!

[@chipstockinvestor]

Did you see this update just over a month ago? As for management ownership, I'd check the time range on the % ownership. kzbin.info/www/bejne/rX20q5SboahohqM

[@hihomojo]

Great update, thanks! Question: Nvidia recently declared a partnership with Cisco - do you see this as a threat to Arista?

[@chipstockinvestor]

Thanks for watching and for the question! Everyone is partnering with Nvidia these days. Nick said over a year ago that "Nvidia had leveled the playing field." At this point, subject to change from competitive forces, everyone has to work with Nvidia or get left behind.

[@hihomojo]

​@@chipstockinvestor My understanding is that Arista has been expected to dominate the "front-end" part of the network, that links AI clusters with the rest of the network. Maybe Nvidia can/will leverage their dominant position in the "backend" part of the network to get customers to use Cisco for the front-end? Nvidia competes with Arista for the backend part of the network, so they might be incentivised to push customers to use Cisco for the front-end, in order to weaken Arista. Would really appreciate your thoughts, this is the only real bear thesis I can think of for Arista, but it could be a big one.

[@user-en5is4lr9v]

How will the Splunk deal benefit CSCO considering ANET has been taking customers away from them?

[@chipstockinvestor]

It's an excellent question, we don't think CSCO is targeting its market share issues at all, just trying to make profit

[@11101Jason]

Hi Guys! Is this latest downgrade due to NVDA taking significant market share a real issue or overhyped? It fell pretty hard yesterday. I've been slowly DCA'ing into it but don't want to jump onto a sinking ship.

[@chipstockinvestor]

We will cover it very soon. But remember, the Nvidia competition is not new. Market analysts throw the market into chaos, market makers swoop in and buy deals. Not saying you should continue to DCA, don't know your situation, but ANET is a quality run business.

[@11101Jason]

@chipstockinvestor thanks...you're the best 👌

[@shannonoliver7992]

Another Superb analysis! Thanks for the eagles on the books; what an insight. I would love to hold this long term. Not cheap, but will it ever be cheap again? Valuations don't matter until they do. Well done, Nick and Kasey!

[@chipstockinvestor]

Well the big cash balance could be absolutely nothing too! We'll just have to wait and see!