What happened
Shares of Arista Networks (ANET -1.73%) rose 29.6% in November, according to data from S&P Global Market Intelligence. The networking technologies stock soared in the beginning of the month following a better-than-expected quarterly performance.
Arista published third-quarter results on Nov. 2, delivering sales and earnings for the period that topped the market's expectations. The company recorded (adjusted) earnings per share of $2.42 on sales of $605.4 million, while the average analyst estimate had called for per-share earnings of $2.21 on revenue of $581.3 million.
Image source: Getty Images.
So what
Arista Networks' Q3 results crushed the market's expectations and showed that the business is posting relatively strong performance despite headwinds related to the coronavirus pandemic. Despite many enterprises being more cautious about taking on new projects and spending, year-over-year declines for sales and earnings came in lower than anticipated. Revenue in the third quarter dipped roughly 7.5% year over year, and earnings dipped 10%, but management guided for a return to sales growth in the fourth quarter.
The combination of Arista's strong earnings report, encouraging guidance, and momentum for the broader market was a recipe for big stock gains last month.
Now what
Arista stock has slipped a bit early in December's trading. The network technology company's share price is down roughly 1% in the month so far.
Arista is guiding for fourth-quarter sales to come in between $615 million and $635 million, representing growth of roughly 13% year over year at the midpoint of the target. The company anticipates an adjusted gross margin between 63% and 65% in Q4 and an adjusted operating margin of roughly 37%.
Arista Networks has a market capitalization of roughly $20.3 billion and is valued at 30 times this year's expected earnings.
