Data Center Tech to Push Arista Stock Higher

Arista StockMore Triple-Digit Returns for ANET Stock

Today’s stock represents another of my favorite strategies for picking promising stocks with potential high returns. The “venture capital” way of stock investing helps investors identify the rising stars whose products make it to a number of industries. Through innovative products and solutions, these companies become critical to their customers’ operations and success.

The case in point being Arista Networks Inc (NYSE:ANET), which is a supplier of cloud networking solutions to different businesses. It is a leading player in the market, providing solutions like its “Extensible Operating System” (EOS), a set of network applications, ethernet switches, and related software. Arista’s cutting-edge products have been gaining traction and Arista stock has been going up consistently over the past few months.

These networking solutions are critical for Internet companies, cloud service providers, and enterprises that run their own data centers. Simply put, a data center can be thought of as the brain of the enterprise, which runs its most critical processes. This brain is kept safe in a secure building and has rows of servers, storage devices, and cables to assure around-the-clock availability of cloud applications.

Today, most consumer applications are delivered as cloud services, with enterprise applications rapidly moving to the cloud as well. This is because cloud services are easier and more cost effective. Arista is a dominant player in building these next-generation data center or cloud networks and ANET stock has been on an upward march.

According to Transparency Market Research, the global data center networking market in 2016 was was valued at $63.05 billion and is expected to touch $228.4 billion by 2025, expanding at a compound annual growth rate (CAGR) of 15.5% during the forecast period. (Source: “Data Center Networking Market – Global Industry Analysis, Size, Share, Growth, Trends and Forecast 2017 – 2025,” Transparency Market Research, March 15, 2017.)

With the increasing popularity of data centers, the future looks bright for companies like Arista that supply cutting-edge technology to these data centers.

The company is well-positioned to gain from this trend on the back of its innovative cloud networking platform. It has been a top performer in the market for data center switches. As of December 31, 2016, the company had delivered its cloud networking solutions to over 4,200 end customers worldwide in over 80 countries. The customers are from a range of industries that include large internet companies, financial services organizations, media and entertainment companies, and government agencies.

Also ReadTop Cloud Computing Stocks to Watch

The high optimism surrounding the business has been reflected in the strong moves made by Arista stock, which is likely to continue posting good gains amid high demand for the company’s networking components.

The stock has gone up by more than 63% in the year to date. Arista stock is up almost 137% in the last one year as compared to the S&P 500 index, which posted gains of about 20% in the same time period.

Arista announced its first-quarter results last month and posted revenue of $335.5 million, a year-over-year increase of 38.5%. The growth was driven by strong adoption of the company’s innovative offerings. The management is upbeat about the second quarter as well and expects a gross margin of about 61% to 64%.

ANET stock chart

Chart courtesy of StockCharts.com

The Bottom Line on Arista Stock

This venture capital stock has huge potential going forward given the lead it has in data center networking solutions. Although the market is competitive, the company has been able to continuously strengthen its position against its competitors. Arista is well prepared to take on future challenges, which bodes well for Arista stock.

Cloud computing is transforming the way IT infrastructure is built and how applications are delivered across thousands of servers. This infrastructure needs high-speed network switches that will continue to be in high demand in the coming years. This is a great catalyst for ANET stock.

At present, the stock is hovering near its all-time highs. Investors could consider investing in this venture capital stock on any sign of weakness.