Arista stock falls after Deutsche Bank warns of ‘resurgent Cisco’

Shares of Arista Networks Inc. fell 0.9% in Tuesday morning trading after analysts at Deutsche Bank cut their rating to hold from buy. Arista shares have more than tripled over the past 12 months, and the team at Deutsche Bank is concerned about valuation. “There is little room for error at current elevated levels,” wrote Vijay Bhagavath. He thinks order pauses are possible during the second half of this fiscal year and into next year, and he also sees new competitive risks emerging. A “resurgent Cisco is starting to make ‘strategic inroads’ into major cloud and content providers,” he wrote, which potentially include Microsoft Inc.’s Azure. “This suggests setup for meaningful competition from Cisco for Cloud customer share of wallet and potential for muted beats and raises from Arista during FY19-20+,” he added. Separately, Morgan Stanley analyst James Faucette raised his Arista price target to $310 from $260, noting that “resellers are raising expectations for enterprise spend” and could present chances for share gains. Arista shares are up 204% over the past 12 months, while Cisco Systems Inc. shares are up 38% and the S&P 500 is up 25%.

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