Arista Earnings: Selloff Uncalled for After Strong Quarter; We Raise Our Fair Value to $140

We raise our fair value estimate for wide-moat Arista Networks to $140 per share, from $130. Arista reported first-quarter sales and operating margin ahead of management guidance, but our valuation bump comes primarily from upward revisions to our longer-term growth assumptions. Despite a strong quarter, Arista shares sold off as much as 8% after the print, in our view likely due to concerns over cloud digestion. We don’t share these concerns in the short term and don’t interpret any of management’s commentary as worrisome. In fact, Arista modestly raised its full-year sales guidance, and we continue to expect it to eclipse this figure. Despite our contrarian fair value upgrade following the quarter, we see shares as fully valued.