Should I buy Arista Networks shares in December 2021?

Arista Networks, Inc. (NYSE: ANET) shares have advanced more than 40% since the beginning of October 2021; the company reported better than expected third-quarter results this month, and the company’s management expects another strong quarter.

The new covid variant represents an issue

Arista Networks is an American computer networking company that designs and sells multilayer network switches to deliver software-defined networking (SDN) solutions for large datacenter, cloud computing, high-performance computing, and high-frequency trading environments.

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Arista Networks reported financial results for the third fiscal quarter at the beginning of November; total revenue has increased by 23.7% Y/Y to $748.7 million, slightly above expectations, while the GAAP earnings per share were $2.81 (beats by $0.52).

Arista’s business continues to perform well, and the company’s momentum during the second quarter continued through the third fiscal quarter.

It is important to mention that a GAAP gross margin was 63.9% in the third fiscal quarter, compared to the GAAP gross margin of 64.2% in the second quarter of 2021 and 63.6% in the third quarter of 2020.

The company’s management revised financial guidance for the fourth fiscal quarter and expects total revenue to be in a range between $775 million – $755 billion, while the non-GAAP gross margin should be between 63% to $65%.

Arista Networks shares have weakened from record highs after Morgan Stanley downgraded this company and assigned an “equal-weight” mark from “overweight.”

Meta Marshall, an analyst from Morgan Stanley, said that Arista would need to bring in “new hyperscale wins” in order to drive its stock price higher; still, such wins aren’t expected over the next six to 12 months.

On the other side, Financial markets have collapsed this Friday as news of a new COVID variant makes investors worldwide worried. Keith Buchanan, senior portfolio manager at Global Investments in Atlanta, added:

What we understand about this new covid variant could accelerate over the weekend; if there is more concerning news than good news, a lot of people don’t want to be holding risk assets on Monday morning or are afraid of what that could look like Monday morning.

Arista Networks shares could easily fall below the current price levels in the upcoming days, especially if the U.S. stock market enters a more significant correction phase.

Bulls control the price action for now

Arista shares advanced more than 40% since the beginning of October 2021, and according to technical analysis, the bulls remain in control of the price action for now.

Rising above $135 supports the positive trend, and the next price target could be around $140.

On the other side, if the price falls below $120, it would be a strong “sell” signal, and we have the open way to $100 support

Summary

Arista Networks continues to improve its position in the market, and the company reported better than expected third-quarter results this month. Arista Networks shares could easily fall below the current price levels in the upcoming days, especially if the U.S. stock market enters a more significant correction phase.

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