This Buy-Rated Tech Stock Could Be an Underrated Tariff Winner, According to Analysts

Globe and Mail

30-04-2025

Rosenblatt Securities, a New York-based investment firm, has upgraded Arista Networks Inc.'s (ANET) stock from 'Sell' to 'Neutral,' citing its resilience and new market advantages. Arista's projections for the second half of 2025 and into 2026 remain strong despite macroeconomic headwinds, giving investors reason to stay the course.
Rising tariffs have turned the tide, making White Box switching options from China and Asia less appealing. This shift benefits Arista directly. Rosenblatt analyst Mike Genovese noted the company's strong lineup of switches compatible with Linear-drive Pluggable Optics transceivers, reinforcing its competitive edge.
Moreover, Rosenblatt says its original 'Sell' thesis has now played out. Once concerned that Arista's Extensible Operating System might lose value in artificial intelligence (AI) factory data centers, analysts now see the firm securing major contracts. Microsoft Corporation (MSFT) could bring in several hundred million dollars, with Oracle Corporation (ORCL) and Alphabet Inc. (GOOG) (GOOGL) each contributing $100 million to $200 million over two to three years. This boosts confidence in Arista's $750 million AI back-end revenue goal for 2025.
About Arista Stock
Based in Santa Clara, California, Arista Networks Inc. (ANET) is a key player in data-driven, client-to-cloud networking, supporting large-scale AI, data centers, campus systems, and routing environments.
With a market cap of $101.3 billion, ANET delivers a robust network stack focused on agility, automation, security, analytics, and availability. Central to its platform is the Extensible Operating System (EOS), a modern publish-subscribe, state-sharing OS that anchors its advanced infrastructure.
Over the past 52 weeks, ANET stock has chalked up a 28.3% gain. In just the past five trading days, the stock rose 16.3%, including a 3% pop on April 29 after the Rosenblatt upgrade.
Currently trading at 32.43 times forward adjusted earnings, ANET commands a premium over its peers. Yet compared to its own five-year average, the valuation is right in line - and even slightly discounted. For seasoned investors, it may be the kind of subtle pricing mismatch that opens the door to a strategic entry before the broader market catches on.
Arista Falls After Q4 Earnings Beat
On Feb. 19, ANET slumped more than 6% after the company beat fourth-quarter earnings results, but offered up lighter-than-expected guidance. The networking firm reported revenue of $1.93 billion for the quarter, marking a 25.3% increase year over year and topping the estimated $1.9 billion.
Non-GAAP gross margin came in at 64.2%, a shade above the guided range of 63% to 64%, though slightly lower than the 65.4% reported in the same quarter last year. Arista delivered a non-GAAP EPS of $0.65, reflecting a 25% jump from the year-ago period and beating the consensus estimate of $0.57.
Plus, AI demand has started to pick up. During the quarter, Meta Platforms, Inc. (META) deployed Arista's Ethernet switch for its latest AI cluster. The win has enhanced the company's presence in the AI space and fueled operational cash flow, which saw a year-over-year increase of more than 95%.
CFO Chantelle Breithaupt noted that this strong performance enables Arista to double down on its investments in strategic areas like AI and Campus markets.
Arista expects revenue for the first quarter of 2025 to range between $1.93 billion and $1.97 billion. It projects a non-GAAP gross margin of around 63% and a non-GAAP operating margin of approximately 44%.
The company is slated to report its Q1 2025 earnings results on May 6. Analysts expect ANET's Q1 EPS to rise 17.8% year over year to $0.53. For the full fiscal year, EPS is forecasted to grow 7.3% to $2.21, with a further projected jump of 16.7% year over year to $2.58 in fiscal 2026.
What Do Analysts Expect for Arista Stock?
Across Wall Street, the sentiment leans decidedly bullish, with an overall rating of 'Moderate Buy.' Of the 20 analysts tracking the stock, 13 are backing a 'Strong Buy,' two suggest a 'Moderate Buy,' four maintain a 'Hold,' and one has issued a 'Strong Sell.'
Rosenblatt's newly constructive view on ANET stock comes with an upwardly revised price target of $85. The average price target of $112.22 represents potential upside of 36.4%, while the Street-high target of $145 signals a possible surge of 76.2% from current levels.