Reuters: Arista’d Development

February 12, 2024

Arista’s lower margin projections

Reuters reached out to us for commentary this afternoon in an article — by Zaheer Kachwala, “Arista Networks’ lukewarm Q1 forecast overshadows profit beat” — regarding why the hot tech stock Arista was down nearly $20 per share in aftermarket trading after reporting 4th quarter numbers that exceeded expecations!

Even with Arista’s profit beat, this seems to be a case of selling on good news as the reported numbers don’t seem strong enough to push shares higher in the short-term. The company is guiding first quarter 2024 revenue to $1.52 to $1.56 billion with gross margins of 62% which is a lower margin ratio than those just achieved in the most recent quarter.

Seems that investor’s knee-jerk after-market reaction is not being kind to those lower gross margin projections. Earnings growth looks like it may slow in 2024 before possibly picking up pace again in 2025.

Article excerpt is below:

“The knee-jerk after-market reaction is not favorable to a lower gross margin projection,” Michael Ashley Schulman, chief investment officer at Running Point Capital, said, adding “the profit beat doesn’t seem strong enough to push shares higher”.

Arista’d Development — Graphics by

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Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-24-21