Shares of Arista Networks Inc. are off 2.4% in Friday trading after Morgan Stanley analyst Meta Marshall downgraded the stock to equal weight from overweight, writing that the stock’s “valuation has come to credit much of the upside we expect over the next year.” In order for Arista’s stock to head toward what Marshall deems her “bull case,” the company would likely need to rack up “new hyperscale wins,” and she doesn’t anticipate that the company will generate these “incremental wins” in the next six to 12 months. “We could be too conservative in moving to equal weight with larger-than-expected share gains in enterprise or faster ramping of 200G/400G upgrades, or with evidence of potential hyperscale wins materializing earlier than expected,” she wrote. “However, we would largely view a faster cycle as creating more difficult 2023 comps.” Marshall raised her price target on the stock to $138 from $115 in conjunction with the downgrade, and her new target accounts for the company’s recent stock split. Shares have added 41% over the past three months as the S&P 500 has risen about 7%.
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