Is Arista Networks stock a buy after announcing an additional $1 billion in stock buybacks?

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on Nov 2, 2021
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  • Arista shares on Tuesday spiked more than 26% after announcing $1 billion more in stock buybacks.
  • The company reported its most recent quarterly results Monday after markets closed, beating estimates.
  • It also issued FQ4 revenue guidance above the Street forecast.

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On Tuesday, Arista Networks Inc. (NYSE:ANET) shares spiked more than 26% after reporting its fiscal Q3 results. The company announced its most recent quarterly results Monday after markets closed, beating the consensus analyst estimates on revenue and earnings. Arista also announced an additional $1 billion in share buybacks.

The company posted non-GAAP earnings per share of $2.96, beating the average for analyst estimates of $2.72. In addition, its GAAP EPS of $2.81, was $0.51 ahead of estimates, while revenue for the quarter increased by 23.7% from the same quarter last year to $748.7 million, surpassing the expectation of $10.58 million.

The company also issued optimistic Q4 revenue guidance in the range of $775 million to $795 million, exceeding the Street forecast of $752.53 million.

Is it too late to buy Arista stock?

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Arista shares seem to be trading at steep valuation multiples of 50.02 P/E and 38.67 forward P/E ratios following Tuesday’s post-earnings spike. As a result, value investors could opt for alternatives in the market. 

In addition, analysts expect its earnings per share to decline by nearly 25% this year before rising at an average annual rate of about 12.50% over the next five years. Therefore, Arista could gain the attention of long-term growth investors despite its expensive pricing.

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Source – TradingView

Technically, the stock seems to have recently spiked to complete a bullish breakout from an ascending channel formation in the intraday chart. As a result, the stock has ventured deep into overbought conditions, creating a perfect opportunity for a pullback.

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Therefore, investors could target short-term pullbacks at about $488.08 or lower at $458.21. On the other hand, if the rally continues, Arista could find solid resistance at about $545.19, or higher at $571.55.

It could be time to take some profits

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In summary, although Arista network issued higher than expected revenue guidance on top of a $1 billion share buyback announcement, the stock seems to have rallied significantly, entering overbought conditions.

Therefore, it could be time for profit-takers to swoop in ahead of a potential pullback.

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