With many equity strategists saying that the market is either fully valued or close at current trading levels, it really makes sense for aggressive growth investors to look to companies that not only beat earnings expectations for the third quarter, but raised guidance above what was anticipated. A new research note from Stifel highlights three technology companies that had not only a tremendous quarter, but raised estimates for the upcoming quarter. That kind of beat-and-raise presentation is exactly the kind of cushion investors need as we head into 2016. The market will need some solid economic growth to push stocks much higher next year.
All three stocks are rated Buy at Stifel. It’s important to note that these are very aggressive companies, and their stocks are only suitable for accounts that can sustain big moves in capital.
This company went public in the summer of 2014 and has continued to be one of the hot tech IPO stories of the past year. Arista Networks Inc. (NYSE: ANET) delivers software-driven cloud networking solutions for large data center and computing environments. In addition, the company’s 10/40/100 gigabit Ethernet switches offer scalability and performance, and they have over 2,700 customers and more than 2 million cloud networking ports deployed worldwide. At the core of Arista’s platform is EOS, an advanced network operating system.
Many on Wall Street think the company could benefit from dual supplier requirements at the Web 2.0 and cloud portals, and that Arista could see upside to the lofty 30% compound annual growth rates currently forecast. Some also see the stock benefiting as networking vendor that is leveraged to data center deployments. The patent lawsuit filed by Cisco and an expected preliminary determination should be coming in January.
While the upside in the earnings and forward guidance are very strong, they could be tempered by ongoing legal issues, but investors stand to make huge gains if judgements are in their favor. The analysts also think that the issues have not stopped Arista customers from buying product, and most of the headline risk is already priced into the stock at current levels.
The Stifel price target for the stock is $95. The Thomson/First Call consensus target is $88.17. Shares closed most recently at $68.90.