Yahoo Finance Arista Networks and Rockwell Automation have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL –June 13, 2024 – Zacks Equity Research shares Arista Networks ANET, as the Bull of the Day and Rockwell Automation, Inc. ROK, as the Bear of the Day. In addition, Zacks Equity Research provides analysis on SunPower SPWR, Nextracker NXT and First Solar FSLR.
Here is a synopsis of all five stocks:
Bull of the Day:
Arista Networks is a networking infrastructure provider that’s expanded rapidly over the past decade alongside cloud computing and the explosion of big data. ANET is now benefitting from the AI revolution.
Microsoft and Meta, the firm’s two biggest clients, rely heavily on Arista Networks for their big data growth and AI dreams. ANET announced in early June a new platform “designed to deliver optimal network performance for the most demanding AI workloads.”
Arista Networks shares have left the Zacks Tech sector, Microsoft, Meta, and tons of other tech titans in the dust over the past decade. The picks-and-shovels big-data and AI stock looks poised to break out to fresh all-time highs soon.
Big Data Goes into Hyperdrive
Arista Networks is a leader in data-driven, client to cloud networking, concentrating on large data center/AI, campus, and routing environments. ANET has more than 8,000+ customers worldwide, including Microsoft (MSFT) and Meta (META). The company said last year that the “cloud titans” accounted for 46% of revenue. Wall Street views ANET’s growing relationship with Microsoft and Meta as a long-term vote of confidence in Arista Networks.
Arista Networks’ offerings are essential and at the cutting edge of big data. ANET played a critical role in the massive expansion of cloud computing over the past decade, as big data turned into one of the backbones of the global economy.
ANET sales soared from $361 million in 2013 to $5.86 billion last year. Cloud computing spending is not something tech firms can easily cut back on. Better yet, the rapid expansion of AI and the race to dominate the space is leading to booming capex spending on data centers.
Arista Networks on June 5 announced what it calls Etherlink AI platforms, aiming to deliver optimized network performance for large AI clusters, including the most demanding workloads such as training and inferencing. ANET’s most recent AI-focused updates came roughly a week after it announced a “technology demonstration of AI Data Centers in order to align compute and network domains as a single managed AI entity, in collaboration with NVIDIA.”
Arista Networks aims to help achieve a “multi-vendor, interoperable ecosystem that enables control and coordination between AI networking and AI compute infrastructure.”
Generative AI is poised to transform into a $1.3 trillion market by 2032, growing at a compound annual rate of roughly 43%, according to a March 2024 Bloomberg report. Meta, Microsoft, Nvidia (NVDA), and other mega-cap tech stocks are set to take a leading role in this growth, benefitting Arista Networks.
Growth Outlook
Arista Networks grew its revenue by an average of 37% in the past three years, including 34% expansion in 2023. ANET is projected to boost its sales by 14% in FY24 and another 15% next year to reach $7.70 billion vs. $5.86 billion in FY23.
The networking infrastructure firm is projected to boost its bottom line by 14% this year and 12% next year. This expected adjusted earnings growth comes after Arista Networks grew its EPS by 52% last year.
Arista Networks boosted its EPS outlook once again when it reported its Q1 results in early May to help it earn a Zacks Rank #1 (Strong Buy) right now. ANET’s recent bottom-line positivity is part of an impressive five-year stretch of upward earnings revision as big data booms.
Plus, the firm grew its GAAP gross margin to 63.7% in the first quarter, up from 59.5% in the prior-year quarter.
Performance, Technical Levels & Valuation
Arista Networks shares soared 1,675% during the last 10 years vs. the Zacks Tech sector’s 270%, blowing away Microsoft’s 960% run and Meta’s 687%. ANET’s huge outperformance continued over the trailing three years, with the stock up 240% vs. Tech’s 15%, MSFT’s 70%, and META’s 51%.
Arista Networks stock has surged 32% YTD. The stock rebounded above its 21-day moving average and it could be ready to break out to fresh highs sooner than later since it is trading solidly below some of its more overbought RSI levels over the last year.
On the valuation side, ANET trades at a 37% discount to its five-year highs at 40.9X forward 12-month earnings. This is hardly cheap, but Wall Street has been paying a premium for Arista Networks for years.
Bottom Line
Arista Networks has an impressive balance sheet, with $5.4 billion in cash and equivalents vs. zero debt. The company in early May authorized a $1.2 billion stock repurchase program after completing its previous $2 billion buyback plan. ANET might be worth buying as a big data, cloud computing, and AI investment.
Bear of the Day:
Rockwell Automation, Inc. is an industrial automation and digital transformation firm facing a near-term slowdown as manufacturing cools following the post-Covid boom.
Rockwell Automation is still poised to benefit from wider megatrends across the economy. But ROK’s near-term earnings outlook has tumbled, pushing the stock down 15% YTD.
ROK 101
Rockwell Automation is an industrial automation and digital transformation company that aims to usher in the next generation of smart manufacturing. ROK is helping drive forward the tech-supported and constantly-connected economy to help its customers with their automation challenges.
The modern economy runs on tech-focused solutions for practically everything. ROK operates three core business units: Intelligent Devices, Software & Control, and Lifecycle Services.
Rockwell’s products and solutions serve an array of industries including power generation, aerospace, infrastructure, semiconductors, life sciences, warehouse and fulfillment, and beyond.
Near-Term Outlook
Rockwell grew its revenue by 17% last year, following back-to-back years of 11% top-line expansion. The company is currently navigating a slowing industrial sector. The firm lowered its 2024 guidance when it reported its Q2 FY24 results in early May, even though it experienced “sequential order improvement.”
Rockwell CEO Blake Moret said in prepared remarks that ROK is seeing more “excess inventory” at its customers, particularly machine builders, than originally expected. The chief executive said ROK was “not yet seeing the accelerated order ramp this fiscal year and are reducing our full-year guidance.”\
ROK’s sales are projected to slip 6% in FY24 to $8.50 billion. Rockwell’s adjusted fiscal 2024 earnings are expected to fall by 16% YoY. ROK’s FY24 earnings estimate has dropped 16% since its last report, with its FY25 outlook 9% lower.
Bottom Line
Rockwell’s recent downward EPS revisions are part of a prolonged decline over the past year to help it land a Zacks Rank #5 (Strong Sell). ROK shares have fallen 15% during the past 12 months vs. the Zacks Industrial Products sector’s 13% climb.
Rockwell trades below its 21-week, 50-week, and 200-week moving averages. Investors might not want to call a bottom on ROK yet. That said, Rockwell is prepared to grow for decades on the back of reshoring, infrastructure spending, the energy revolution, and the never-ending push to streamline work through automation.
Additional content:
Solar Revolution Gaining Traction: 3 Stocks to Keep an Eye On
The urgency to transition to solar energy has intensified in the effort to combat greenhouse gas emissions. Moving away from fossil fuels to embrace renewable energy sources presents significant investment opportunities despite the substantial financial commitments and time required for this shift. In this context, companies like SunPower, Nextracker and First Solar are strategically positioned to benefit from this transition.
Solar Leads in New Energy Capacity Additions
The share of renewable energy in electricity generation is rapidly increasing in the United States. According to the U.S. Energy Information Administration’s (“EIA”) latest short-term energy outlook, the proportion of renewables in domestic electricity generation will rise to 23% this year from 21% last year. Conversely, coal's share is projected to decline from 17% to 16%.
The EIA anticipates a 3% increase in total U.S. electricity generation this year. Significantly, renewables will drive the largest portion of this growth, with solar energy solely responsible for more than 70% of the increase in domestic power generation.
3 Stocks to Gain
Thus, it is time for investors to keep an eye on solar energy stocks. We have zeroed in on three such stocks.
In the United States,SunPower is among the leading solar companies delivering personalized, premium renewable energy solutions for homes designed to address the specific requirements of families. The company recently announced that it is including the Tesla Powerwall 3 in its carefully selected range of premium yet affordable solar and storage solutions. It carries a Zacks Rank #3 (Hold).
Nextracker is expected to experience growth due to its provision of intelligent, integrated solar tracker and software solutions. A strong balance sheet, substantial backlog and widespread global demand are the main factors driving the company’s success. Currently, Nextracker carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
To accelerate its fight against global warming, First Solar is primarily engaged in providing eco-efficient solar modules. The advanced thin-film photovoltaic modules of First Solar, with a Zacks Rank of 3, represent highly advanced solar technologies of the next generation.
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First Solar, Inc. (FSLR) : Free Stock Analysis Report
Rockwell Automation, Inc. (ROK) : Free Stock Analysis Report
SunPower Corporation (SPWR) : Free Stock Analysis Report
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
Nextracker Inc. (NXT) : Free Stock Analysis Report
