Cloud Play ANET stock looks more attractive after its stock split

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Launched in 2008, Arista Networks (NYSE:A NET) provides data-driven client-to-cloud networking services for large data centers, as well as campus and routing environments. The company went public in June 2014, and you may have heard of the recent huge drop in ANET shares.

Source: Various photographs / Shutterstock.com

There is no need to worry; the fall was not caused by the dumping of investor stocks. Rather, it was triggered by a split in the action. This development could in fact make Arista more attractive to investors and traders.

We’ll definitely dig deeper into the details of the share split, but there’s a bigger story to tell here. Specifically, Arista Networks delivered strong revenue growth – and new data proves it.

Not only that, but the company has just been inducted into an elite association of security software vendors. This represents another big victory for Arista, and by extension, for the shareholders of the company.

A closer look at the ANET stock

So far in 2021, Arista’s loyal investors have seen steady gains. The stock started the year at $ 70, but was already threatening to exceed $ 100 by the summer.

Then a rapid acceleration occurred in early November when ANET stock jumped to $ 130. Now, value investors might be wondering if the stock isn’t too expensive. So let’s take a look at a commonly used evaluation measure.

Currently, Arista Networks 12-month price-to-earnings ratio is 51.88. It’s not the highest P / E ratio in the world, but it is somewhat high. Nonetheless, a high P / E ratio can be justified when a business is rapidly increasing its revenue, and I will definitely investigate this.

Another important note regarding ANET shares: the company recently made a one-for-four split. How does this make the share more attractive to potential shareholders?

As Investor place Contributor Shrey Dua explains, “In the short term, Arista is more palatable to investors. At only a quarter “of its previous price,” Arista can once again attract new investors to the stock.

Overcome a difficult environment

Again, even a slightly high P / E ratio can be fine when a business is showing strong revenue growth. Fortunately, this appears to be the case with Arista Networks.

Not too long ago, the company released its financial results for the third quarter of 2021. It turns out that Arista’s revenue totaled $ 748.7 million, an increase of 5.8% from quarter to quarter.

Better yet, its revenue climbed 23.7% year-on-year. We should also observe that Arista Networks reported GAAP net income of $ 224.3 million in the third quarter.

This is a significant improvement over the $ 168.4 million GAAP net income it recorded in the third quarter of 2020. Arista Networks President and CEO Jayshree Ullal explained that the company’s quarterly results were impressive, especially given one particular hurdle that many tech companies had to overcome.

“Despite a challenging supply chain environment, I am pleased with the delivery of another record quarter of Arista’s financial results in the third quarter of 2021,” Ullal said.

An honor from a tech giant

In the 2020s, cybersecurity has become a priority for many companies. Companies in this niche should work together to grow their communities while helping keep their customers safe.

There is in fact an association that meets these specific needs. But not all companies can join. Most recently, Arista Networks was invited to join the group, which is led by Microsoft (NASDAQ:MSFT) and known as the Microsoft Intelligent Security Association (MISA).

MISA can simply be described as an ecosystem of independent software vendors and managed security service providers. However, MISA also has a community service aspect, as the association seeks to integrate the solutions of its members to better defend against a world of increasing threats.

Arista was appointed to join MISA because Arista’s Network Detection and Response (NDR) platform and Microsoft Azure Sentinel have been linked.

The invitation is a major honor for Arista Networks, and it strengthens the company’s relationship with Microsoft while placing Arista in an elite class of cybersecurity service providers.

The bottom line

The stock split is expected to make ANET stock more attractive to potential investors. However, this is not the only reason to take a position on the title.

As Arista Networks continues to generate strong revenue growth and maintain a strong relationship with Microsoft, it’s easy to buy and hold stocks with confidence.

At the date of publication, David Moadel did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

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