An eventful stretch has put Arista Networks (ANET) back in the spotlight. Hot off its recent Analyst Day, the company unveiled a new long-term model, emphasizing sustained revenue growth and deepening its focus on cloud and AI-driven networking. Analyst commentary is pointing to Arista’s growing strength in markets like AI data centers and Ethernet solutions for hyperscalers. A slew of leadership updates, most notably the expanded role of founder and CTO Kenneth Duda, suggests a sharpened strategic push into high-growth areas. All this has contributed to major momentum in the stock. Over the past year, shares have climbed 56%, with nearly 34% gains year to date and a remarkable 63% jump over the past 3 months alone. A mix of upbeat earnings and management’s confident guidance has certainly helped. On top of that, the executive reshuffle and board-level changes look to be fortifying Arista’s approach at a time when investor optimism is especially sensitive to credible growth stories. So with the stock on a tear and Wall Street warming up, should investors view Arista Networks as attractively valued given its new model or is the current price already baking in the next chapter of growth?

Most Popular Narrative: 17.7% Overvalued

According to the most widely followed narrative, Arista Networks is currently trading at a premium, with the stock seen as 17.7% above its fair value. The narrative highlights the company’s impressive performance and ambitious financial projections, but ultimately suggests that the market has already priced in much of the future growth story.

Perfect fit of Arista HW and Arista SW, as known from Apple devices, leads to high customer satisfaction and customer binding. I focus also on: More equity than debt. Ratio is at 0%. So debt free company!

Curious what drives confidence in such a lofty valuation? This narrative is built on bold growth assumptions and hints at a powerful combination of operational strength and margin potential. Wondering which financial milestones are being counted on to support that premium? Explore how the numbers fuel this compelling market stance.

Result: Fair Value of $127.06 (OVERVALUEED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, shifting market demand or unexpected competitive pressure could quickly challenge these optimistic growth assumptions and introduce volatility to the current valuation story.

Find out about the key risks to this Arista Networks narrative.

Another View: Discounted Cash Flow Model

Contrasting with the upbeat market narrative, our SWS DCF model also signals that Arista Networks is trading above what its long-term cash flows would justify. This suggests a different perspective on the current price momentum. Is the optimism outpacing fundamentals?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day ( check out Arista Networks for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Arista Networks Narrative

If these takes do not align with your perspective, you can dig into the details yourself and shape a personal Arista Networks narrative in just a few minutes. Do it your way.

A great starting point for your Arista Networks research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.