Arista Networks Downgraded by BMO to Market Perform on Valuation

Arista Networks (ANET) received an investment-rating downgrade Thursday to market perform from outperform from BMO Capital Markets, which cited the valuation of the cloud-networking technology company’s stock.

The firm kept its price target on the shares at $190 each, which is slightly above their Wednesday closing price of $186.55.

BMO noted the shares have soared 93% in the year to date versus a 12% increase in the broad Standard & Poor’s 500 index and said “we believe the risk/reward is less compelling following the share appreciation and multiple expansion.”

The firm noted the stock’s current valuation at about 33 times its 2018 earnings-per-share estimate, well above its network-equipment peers, as “warranted, given Arista’s growth, execution, share gains, and opportunity.” However, it said “we see less upside at current levels and believe the shares are pricing in continued upside to estimates, and leave little margin for error.”

BMO added: “While the performance last quarter was outstanding, we expect a lower magnitude of upside going forward, particularly as there is some customer concentration risk.”

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