Why Wells Fargo Is Turning Bullish On Arista Networks, Neutral On Cisco

The shift back from value to growth investments and fundamental upside potential make shares of Arista Networks Inc ANET more attractive than Cisco Systems Inc CSCO, according to Wells Fargo.

The Network Equipment Analyst: Aaron Rakers upgraded the rating for Arista Networks to Overweight, while raising the price target from $142 to $160. The Wells Fargo analyst also downgraded the rating for Cisco Systems to Neutral, while lowering the price target from $70 to $65.

The Network Equipment Thesis: Arista Networks is well-positioned “for a strong 400G hyperscale cloud upgrade cycle” with increasing visibility into incremental growth via “AI-centric infrastructure leveraging Ethernet core switching/routing to connect 1,000s of CPUs, GPUs, and DPUs,” Rakers said in the note.

“Arista’s significant inventory + purchase commitment expansion” is an indicator of “potential revenue upside,” he added.

“We are not making a negative/downside fundamental call on Cisco, and we maintain a positive long-term view on the company’s subscription model execution and incremental webscale traction. We do, however, think shares of CSCO could remain more range bound,” the analyst further wrote.

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