Arista Networks Stock Update

Investing.com reports that Arista Networks (NYSE:ANET) stock is deemed a "core holding" for investors by Citi strategists. This assessment is based on:
– Strong demand for data center switches
– Minimal exposure to risks tied to China concerning sales and supply chain
– A high-caliber management team

Despite this, Citi’s team has lowered ANET in its rankings due to limited upside potential following an 80% year-to-date rise. With a current valuation at 45 times price-to-earnings (P/E), the stock appears expensive.

Analysts have reiterated a Buy rating and a $115 price target on ANET, stating they “remain broadly constructive on the networking equipment group.”

Networking stocks have outperformed semiconductors and hardware by 24% and 27% year-to-date, respectively, driven largely by the adoption of AI technologies. Investors continue to seek opportunities where AI is enacting significant change.

Citi strategists, led by Atif Malik, view the rollout of networking-enabled AI infrastructure as a multi-year investment cycle. They predict an acceleration of ASIC solutions entering 2025, necessitating additional AI infrastructure for intra/inter-server and data center interconnects.

Furthermore, the optical segment is expected to benefit from AI-driven increases in density, latency, and complexity. As part of their AI infrastructure framework, Citi highlights Apple (NASDAQ:AAPL), Ciena (NYSE:CIEN), and Coherent (NYSE:COHR) as top picks in the sector.

Regarding Apple, Citi has maintained December quarter estimates, with services revenue surpassing expectations slightly while product revenue was modestly below. The anticipated rollout of iOS 18.2 in December is expected to significantly influence iPhone replacement trends over the next few quarters. The staggered introduction of iOS versions 18.2, 18.3, and 18.4, featuring Apple Intelligence updates, distinguishes the iPhone 16 and 17 refresh cycle from previous iterations.