UPDATE: MKM Partners Downgrades Arista Networks (ANET) to Neutral
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(Updated - September 19, 2016 10:40 AM EDT)
MKM Partners downgraded Arista Networks (NYSE: ANET) from Buy to Neutral with a price target of $79.00 (from $81.00). Analyst Michael Genovese is cautious on margin risks.
Genovese explained, "We are downgrading ANET to Neutral from Buy because we are concerned that the need to transition to all on-shore U.S. procurement and manufacturing could cause GMs to come in lower than consensus, particularly in 4Q16 and 1H17. Many investors likely view Arista as a company that tends to guide conservatively, and then beat, its margins guidance. However, for the first time ever, we see conditions in place that could lead to GMs actually missing most analyst's estimates. We are not changing our revenue forecasts, but we are reducing 2016/2017 GMs to 63.3%/62.0% from 63.8%/63.3% and lowering 2016/2017 EPS to $2.88/$3.23 from $2.93/$3.40. Our new 12-month FV estimate is $79, down from $81, based on 21x 2017E EPS plus $11 per share in net cash."
Shares of Arista Networks closed at $85.03 yesterday.
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