Morgan Stanley: Arista Networks' data center business growth momentum strengthens, raising target price to $410 USD

According to CNBC, Morgan Stanley analyst reiterated an overweight rating on Arista Networks (ANET.US) and raised the target stock price for this networking solutions company from $355 to $410. Morgan Stanley stated that as Ethernet continues to take market share from InfiniBand, Arista's momentum in the cloud and data center networking space continues to strengthen.

Morgan Stanley analysts Meta Marshall and Mary Lenox stated in an investor report on Thursday, "We believe Arista's valuation of about 39 times fiscal 2026 expected earnings per share is not cheap, and the buyer's valuation is already high. However, these data points are encouraging as there are multiple growth paths, and Arista has the opportunity to gain market share from InfiniBand in the Ethernet space."

Arista has shown stable growth this year, with its stock price more than doubling in the past 12 months. On October 11, the stock closed at a historic high of $416.93.

As artificial intelligence applications require larger and more complex data center configurations, the networking company has also secured several major cloud customers this year. The company recently began trials with its fifth major cloud customer of the year. It is also working with Meta (META.US) on a 100,000 GPU cluster.

Marshall noted, "We believe Arista's next major catalyst will be seeing the 100,000 Meta cluster shift to deployment/revenue. However, the timing of deployments remains uncertain, depending on the bottlenecks cloud computing customers face in facilities/power/labor/expertise."

Arista plans to announce its third-quarter 2024 financial results after the U.S. market closes on November 7. Analysts generally expect the company to report adjusted earnings per share of $2.08 and revenue of $1.76 billion for the quarter ending September 30