Arista Networks Stock Downgraded On Margin Pressures, But Shares Rise — Retail Sentiment Turns Sour

Erste noted that while Arista is on its way to creating a cross-vendor ecosystem to enable coordination between artificial intelligence (AI) networks and computing infrastructure, it is currently facing a decline in its operating margins.

Shares of Arista Networks Inc. (ANET) gained nearly 2% in Monday’s regular trading session, defying a downgrade from the analysts at Erste Group.

According to The Fly, Erste downgraded Arista to ‘Hold’ from ‘Buy,’ while underscoring that the company’s margins are under stress.

The brokerage noted that while Arista is on its way to creating a cross-vendor ecosystem to enable coordination between artificial intelligence (AI) networks and computing infrastructure, it is currently facing a decline in its operating margins.

Coupled with high valuations of the networking sector, Erste notes that the upside potential of Arista’s stock is limited.

However, it added that Arista could still continue to post above-average revenue growth in the medium term.

On the other hand, JPMorgan added Arista to its “Analyst Focus List” while maintaining an ‘Overweight’ rating on the stock. Despite a recent pullback in Arista’s shares, the brokerage observed that market share loss concerns have “limited materiality.”

Striking a contrasting note, JPMorgan believes Arista stock has “ample room for upside” in terms of earnings as well as valuations.

Data from Koyfin shows the average price target for Arista is $117.04, implying a nearly 38% upside from Monday’s closing price.

Of the 26 analyst ratings, there are seven ‘Strong Buy’ and 14 ‘Buy’ calls, while four brokerages suggest investors to ‘Hold’ the stock, and one has a ‘Sell’ recommendation.

Retail sentiment on Stocktwits soured, hovering in the ‘bearish’ (29/100) territory. Message volumes were at ‘extremely low’ levels at the time of writing.

However, one user struck an optimistic note, saying the stock is “oversold” and that it should be back above the $100 level “soon.”

Arista’s stock has fallen more than 23% year-to-date.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<