Why Arista Networks Inc. Stock Skyrocketed Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Arista Networks  (NYSE: ANET  ) jumped more than 20% Tuesday after several analysts initiated coverage on the stock.

So what: Going into yesterday's close, Arista Networks had already surged 45% from its June 6 IPO price of $43 per share. But today marked the end of the cloud networking specialist's 25-day post-IPO "quiet period" mandated by the SEC, which means its underwriters are now free to weigh in with their opinions on the stock.

Sure enough, no fewer than a dozen analyst firms chimed in today. Of those, at least 10 started Arista with a buy equivalent rating, with average price targets sitting around $77 per share. That still represents a modest premium to Arista's current price just below $72 per share. 

Now what: Then again, shares don't exactly look cheap at nearly 10 times trailing 12-month sales and 50 times next year's expected earnings. But Arista's growth is impressive, most recently with first-quarter sales jumping 91% year over year to $117 million. If Arista can maintain that growth while ultimately translating it to sustained profitability over the long term, I see no reason it can't continue rewarding patient investors.

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Steve Symington

Technology and consumer goods specialist for the Fool. Steve looks for responsible businesses which positively shape our lives. Then, he invests accordingly. Enjoy his work? Connect with him on Twitter & Facebook so you don't miss a thing.

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Related Tickers

8/28/2015 4:02 PM
ANET $76.37 Up +1.13 +1.50%
Arista Networks CAPS Rating: ****