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Why Arista Networks Shares Gained 23.7% in July

By Anders Bylund – Aug 10, 2020 at 12:37PM

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Investors expected big things from the networking equipment maker's earnings report in early August.

What happened

Shares of Arista Networks (ANET -1.66%) rose 23.7% in July 2020, according to data from S&P Global Market Intelligence. The networking equipment maker didn't have much news to share in July, but analysts could smell an impressive second-quarter report coming up in early August.

So what

Several analyst firms posted bullish previews of Arista's second-quarter results in the second half of July, driving the stock steadily higher. When the second-quarter report finally arrived, it was a solid beat-and-raise effort that triggered an immediate 11% sell-off because the expectations had been set so incredibly high just before Arista's report.

Several miniature toy workers appear to be plugging an Ethernet cable into an open port on a router.

Image source: Getty Images.

Now what

All told, Arista's stock has now gained 6% since the end of June. That's roughly in line with the broader market. The company is facing higher component and shipping costs due to the COVID-19 crisis, but it's also positioned to benefit from rising investments in data center infrastructure -- also partly based on coronavirus effects. It's hard to tell where this stock will go next, and the shares look fairly valued today. I'm neither a buyer nor a seller of Arista shares right now.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Arista Networks. The Motley Fool has a disclosure policy.

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