ANET - Embedded Expectations Analysis - 2020 08 05
Arista Networks, Inc. (ANET:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 31.4x Uniform P/E. Even at these levels, the market has bearish expectations for the firm, and management may be concerned about meeting revenue targets, operating expense savings, and supply chain constraintsValens' qualitative analysis of the firm's Q1 2020 earnings call highlights that management may lack confidence in their ability to meet their campus revenue target, sustain operating expense reductions, and emerge stronger from the pandemic than industry peers. In addition, they may have concerns about further constraints in their supply chain, cloud titan use case demand, and their customer's ability to test their enterprise and campus products
Arista Networks is engaged in providing cloud networking solutions, which consist of its Extensible Operating System (EOS), a set of network applications and its Ethernet switching and routing platforms. The programmability of EOS enable the company to create a set of software applications that address the requirements of cloud networking, including workflow automation, network visibility and analytics, and enable the company to integrate with third-party applications for virtualization, management, automation, orchestration and network services. EOS supports cloud and virtualization solutions, including VMware NSX, Microsoft System Center, OpenStack and other cloud management frameworks.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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