Daily Stock Pick for August 9, 2023

Yesterday we looked at a tech stock that’s taken such a beating it was trading in deep value territory (aka it was likely substantially undervalued).

Today, we’re going to look at the opposite – a tech stock that’s been hitting one new all-time high after another this year.

As you might suspect, this stock is very much involved in AI – the hottest theme of 2023.

Unlike other AI stocks, however, today’s pick has one distinct advantage – it’s already solidly profitable but it’s not yet a giant stock with limited upside.

That alone is reason to consider this stock – especially with the AI train still going strong. 
Now, factor in continued strong growth on both the top and bottom line (as seen in its recent earnings), and this is one stock that could keep the streak going.

Arista Networks, Inc. (ANET)

Arista Networks provides high-performance cloud networking solutions – such as advanced routers and switches. Its clients are primarily data centers and network communications companies. 

Where does AI fit into the picture, you ask?

Well, AI is demanding a lot from data centers – just look at the below headline from Forbes.

And since data centers are Arista’s clients – and Arista is recognized as a market leader in the cloud networking solutions space – Arista is a strong beneficiary of the AI boom.

This has already been reflected in its recent earnings. It beat consensus estimates for both revenue and earnings (up 39% and 64% year-on-year, respectively) – with its guidance for the current quarter also coming in ahead of estimates. Companies are snapping Arista’s 7800 series switches, which are specifically designed to support AI workloads.

In short, Arista is growing rapidly on both the top and bottom lines, has a robust balance sheet with almost zero debt, and strong secular tailwinds from the growth in both cloud computing and AI.

Yes, the stock is at an all-time high. No, it’s not a “cheap stock”. But there’s strong evidence for this stock still having plenty of room to run – and for quite a while at that.

To your wealth,
Felix @ Ace of Investing