Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Arista Networks Stock Was Slammed Friday

By Daniel Sparks - Nov 1, 2019 at 4:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors didn't like guidance.

What happened

Shares of computer networking stock Arista Networks ( ANET -1.69% ) took a hit on Friday, sinking 24.2% by the time the market closed.

The stock pulled back despite solid third-quarter results. The culprit for bearishness toward the stock on Friday was management's guidance for the fourth quarter.

A chalkboard sketch of a falling line chart.

Image source: Getty Images.

So what

Arista Networks reported revenue of $654 million, up 7.6% year over year. Adjusted earnings per share for the tech stock were $2.69, up from $2.11 in the year-ago period.

"In Q3 2019 we continued to see the adoption of our cloud networking technology in more diverse environments," said Arista CEO Jayshree Ullal in the earnings release. But Ullal said the company expects "a sudden softening in Q4 with a specific cloud titan customer..."

Now what

Analysts believe the "cloud titan" is Facebook. In Arista's earnings call, Ullal said that one of its largest clients recently informed Arista that it wouldn’t be following through with large orders Arista was expecting. 

"Naturally, this type of volatility brings a sudden and severe impact to our Q4 guidance," said Ullal during the call.

Arista guided for fourth-quarter revenue between $540 million and $560 million. Analysts were expecting revenue during the period to be $686 million.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Arista Networks, Inc. Stock Quote
Arista Networks, Inc.
$121.20 (-1.69%) $-2.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.