July 16, 2017

NYSE: ANET

ARISTA NETWORKS INC

BUY HOLD SELL

BUY
RATING SINCE 06/07/2016
A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F TARGET PRICE $203.14

Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
NA NA 1.40 $11.1 Billion $68.75-$162.97 $154.77

Sector: Technology Sub-Industry: Communications Equipment Source: S&P

Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years
ANET BUSINESS DESCRIPTION
Arista Networks, Inc. supplies cloud networking 225
solutions in the Americas, Europe, the Middle East,
TARGET
TARGET
TARGETPRICE
PRICE
PRICE$203.14
$203.14
$203.14 200
Africa, and the Asia-Pacific.
175
STOCK PERFORMANCE (%)
3 Mo. 1 Yr. 3 Yr (Ann) 150
Price Change 17.82 120.28 30.50
125
GROWTH (%)
Last Qtr 12 Mo. 3 Yr CAGR 100
Revenues 38.51 35.71 NA 75
Net Income 135.38 75.87 NA
EPS 122.91 71.11 NA 50
Rating History
RETURN ON EQUITY (%) HOLD BUY
ANET Ind Avg S&P 500
Volume in Millions
Q1 2017 18.87 11.92 13.16 10
Q1 2016 15.51 6.03 11.83
Q1 2015 16.21 5.59 13.71 5

0
P/E COMPARISON 2015 2016 2017
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History

RECOMMENDATION
We rate ARISTA NETWORKS INC (ANET) a BUY. This is based on the convergence of positive investment
measures, which should help this stock outperform the majority of stocks that we rate. The company's
strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position
with reasonable debt levels by most measures, notable return on equity, impressive record of earnings per
share growth and compelling growth in net income. We feel its strengths outweigh the fact that the company
50.25 24.30 24.41 is trading at a premium valuation based on our review of its current price compared to such things as
ANET Ind Avg S&P 500 earnings and book value.

HIGHLIGHTS
EPS ANALYSIS¹ ($) The revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior,
revenues rose by 38.5%. Growth in the company's revenue appears to have helped boost the earnings per
share.

ANET's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying
Q1 0.34
Q2 0.33

that there has been very successful management of debt levels. To add to this, ANET has a quick ratio of 2.35,
which demonstrates the ability of the company to cover short-term liquidity needs.
Q3 0.39
Q4 0.60

Q1 0.48
Q2 0.53
Q3 0.69
Q4 0.79

Q1 1.07

The return on equity has improved slightly when compared to the same quarter one year prior. This can be
construed as a modest strength in the organization. Compared to other companies in the Communications
2015 2016 2017 Equipment industry and the overall market, ARISTA NETWORKS INC's return on equity exceeds that of both
NA = not available NM = not meaningful
the industry average and the S&P 500.
1 Compustat fiscal year convention is used for all fundamental
data items. ARISTA NETWORKS INC reported significant earnings per share improvement in the most recent quarter
compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per
share growth over the past two years. We feel that this trend should continue. During the past fiscal year,
ARISTA NETWORKS INC increased its bottom line by earning $2.49 versus $1.66 in the prior year. This year,
the market expects an improvement in earnings ($3.93 versus $2.49).

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500
and the Communications Equipment industry. The net income increased by 135.4% when compared to the
same quarter one year prior, rising from $35.25 million to $82.96 million.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 1
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 July 16, 2017
NYSE: ANET

ARISTA NETWORKS INC

Sector: Technology Communications Equipment Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
NA NA 1.40 $11.1 Billion $68.75-$162.97 $154.77

PEER GROUP ANALYSIS INDUSTRY ANALYSIS

REVENUE GROWTH AND EBITDA MARGIN*
The US communications equipment industry is comprised of companies that manufacture communication
equipments and products, including LANs, WANs, routers, telephones, switchboards and exchanges. The
50%

NOK
industry is highly competitive and characterized by rapidly changing technologies, evolving industry and
FA

government standards, changes in customer preferences, and new product introductions and enhancements
ANET
VO
RA

PANW ARRS
BL

Companies compete on the basis of product performance, quality, customer service, technological
E

innovation, delivery time and price. The industry is becoming increasingly concentrated and globalized,
COMM dominated by large players with significant financial resources and technological capabilities. Cisco Systems
(CSCO), Nokia (NOK), Motorola Solutions (MSI), and Ericsson (ERIC) are large players.
BRCD MSI
JNPRFFIV
Revenue Growth (TTM)

HRS Industry demand is dependent on the capital spending of cellular and broadband companies for constructing,
rebuilding or upgrading their communications systems. The domestic market is evolving at a brisk pace as
cable and telecom network operators expand their video, data and voice services, commonly known as the
UN
FA

“triple play”, to expand their subscriber base. Telecom operators are expanding their broadband networks
VO
-30%

and offering advanced video and data services using IPTV and PON technologies. Cable operators are
RA

ERIC
B

responding by bundling voice-over-IP services and expanding their broadband data service through Data
LE

-15% 30% Over Cable Service Interface Specifications (DOCSIS).

EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $5.2 Billion and $36.9 Billion.
Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
REVENUE GROWTH AND EARNINGS YIELD
50%
Companies are regulated by the United States Federal Communications Commission (FCC) and other global
governmental communication regulators. The International Telecommunications Union (ITU) adopts cellular
wireless access standards for cellular industry infrastructure.
The industry faces investment risks related to the introduction of new products for the transmission of
telephony and high-speed data over hybrid fiber coaxial cable systems. Research and development is a
complex and uncertain process, requiring high levels of innovation and an accurate understanding of market
trends. The industry has witnessed consolidation in order to facilitate product breadth and improve
technologies.

NOK PEER GROUP: Communications Equipment

Recent Market Price/ Net Sales Net Income
FA

ANET Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M)
VO
RA

PANW ARRS ANET ARISTA NETWORKS INC 154.77 11,145 50.25 1,222.45 231.91
BL
E

FFIV F5 NETWORKS INC 128.29 8,301 21.82 2,056.08 388.08

COMM COMM COMMSCOPE HOLDING CO INC 35.65 6,877 28.75 4,916.93 243.82
MSI ARRS ARRIS INTERNATIONAL PLC 28.30 5,314 30.11 6,697.52 181.58
BRCD JNPR
HRS BRCD BROCADE COMMUNICATIONS SY 12.70 5,208 90.71 2,382.24 60.44
Revenue Growth (TTM)

FFIV NOK NOKIA CORP 6.33 36,944 NM 24,650.10 -746.04

ERIC TELEFONAKTIEBOLAGET LM ERICS 7.39 22,705 NM 23,256.56 -1,273.45
UN

MSI MOTOROLA SOLUTIONS INC 88.33 14,439 24.40 6,126.00 620.00

FA
VO
-30%

HRS HARRIS CORP 115.14 14,037 22.85 6,262.00 582.00

RA

ERIC
B
LE

PANW PALO ALTO NETWORKS INC 141.00 12,947 NM 1,653.30 -209.80

-6% 6%
JNPR JUNIPER NETWORKS INC 29.09 11,115 18.41 5,113.20 610.10
Earnings Yield (TTM)
The peer group comparison is based on Major Communications Equipment companies of comparable size.
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -21.1% and
46.6%. Companies with NA or NM values do not
appear.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 2
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 July 16, 2017
NYSE: ANET

ARISTA NETWORKS INC

Sector: Technology Communications Equipment Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
NA NA 1.40 $11.1 Billion $68.75-$162.97 $154.77

COMPANY DESCRIPTION STOCK-AT-A-GLANCE

Arista Networks, Inc. supplies cloud networking Below is a summary of the major fundamental and technical factors we consider when determining our
solutions in the Americas, Europe, the Middle East, overall recommendation of ANET shares. It is provided in order to give you a deeper understanding of our
Africa, and the Asia-Pacific. The company's cloud rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
networking solutions consist of its Extensible Operating important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
System and a set of network applications, as well as understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
gigabit Ethernet switching and routing platforms, valuation. Please refer to our Valuation section on page 5 for further information.
including universal leaf, spline, and universal spine
products. It also provides post contract customer support FACTOR SCORE
services, such as technical support, hardware repair and
parts replacement beyond standard warranty, bug fix, Growth out of 5 stars 5.0
patch, and upgrade services. The company serves a Measures the growth of both the company's income statement and weak strong
range of industries comprising Internet companies, cash flow. On this factor, ANET has a growth score better than 90% of
service providers, financial services organizations, the stocks we rate.
government agencies, media and entertainment
companies, and others. It markets and sells its products
through distributors, value-added resellers, system
Total Return out of 5 stars 5.0
integrators, and original equipment manufacturer Measures the historical price movement of the stock. The stock weak strong
partners, as well as through its direct sales force. The performance of this company has beaten 90% of the companies we
company was formerly known as Arastra, Inc. and cover.
changed its name to Arista Networks, Inc. in October
2008. Arista Networks, Inc. was founded in 2004 and is Efficiency out of 5 stars 4.5
headquartered in Santa Clara, California. Measures the strength and historic growth of a company's return on weak strong
invested capital. The company has generated more income per dollar of
ARISTA NETWORKS INC capital than 80% of the companies we review.
5453 Great America Parkway
Santa Clara, CA 95054
USA
Price volatility out of 5 stars 4.5
Phone: 408-547-5500 Measures the volatility of the company's stock price historically. The weak strong
Fax: 408-538-8920 stock is less volatile than 80% of the stocks we monitor.
http://www.arista.com
Solvency out of 5 stars 4.5
Measures the solvency of the company based on several ratios. The weak strong
company is more solvent than 80% of the companies we analyze.

Income out of 5 stars 0.5

Measures dividend yield and payouts to shareholders. This company weak strong
pays no dividends.

THESTREET RATINGS RESEARCH METHODOLOGY

TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.

Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 3
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 July 16, 2017
NYSE: ANET

ARISTA NETWORKS INC

Sector: Technology Communications Equipment Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
NA NA 1.40 $11.1 Billion $68.75-$162.97 $154.77

Consensus EPS Estimates² ($) FINANCIAL ANALYSIS

IBES consensus estimates are provided by Thomson Financial
ARISTA NETWORKS INC's gross profit margin for the first quarter of its fiscal year 2017 is essentially
unchanged when compared to the same period a year ago. The company has grown sales and net income
significantly, outpacing the average growth rates of competitors within its industry. ARISTA NETWORKS INC
is extremely liquid. Currently, the Quick Ratio is 2.35 which clearly shows the ability to cover any short-term
cash needs. The company's liquidity has decreased from the same period last year.

At the same time, stockholders' equity ("net worth") has greatly increased by 44.53% from the same quarter
last year. Overall, the key liquidity measurements indicate that the company is very unlikely to face financial
0.94 3.93 E 4.68 E difficulties in the near future.
Q2 FY17 2017(E) 2018(E)
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Q1 FY17 Q1 FY16
Net Sales ($mil) 335.48 242.20
EBITDA ($mil) 78.36 54.51
EBIT ($mil) 73.42 49.74
Net Income ($mil) 82.96 35.25

BALANCE SHEET
Q1 FY17 Q1 FY16
Cash & Equiv. ($mil) 1,043.24 762.25
Total Assets ($mil) 1,939.60 1,209.95
Total Debt ($mil) 40.84 40.83
Equity ($mil) 1,228.37 849.86

PROFITABILITY
Q1 FY17 Q1 FY16
Gross Profit Margin 65.32% 66.01%
EBITDA Margin 23.35% 22.50%
Operating Margin 21.88% 20.54%
Sales Turnover 0.63 0.74
Return on Assets 11.95% 10.89%
Return on Equity 18.87% 15.51%

DEBT
Q1 FY17 Q1 FY16
Current Ratio 3.26 4.78
Debt/Capital 0.03 0.05
Interest Expense 0.72 0.75
Interest Coverage 102.68 66.23

SHARE DATA
Q1 FY17 Q1 FY16
Shares outstanding (mil) 72 69
Div / share 0.00 0.00
EPS 1.07 0.48
Book value / share 17.08 12.40
Institutional Own % NA NA
Avg Daily Volume 810,618 877,860
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 4
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 July 16, 2017
NYSE: ANET

ARISTA NETWORKS INC

Sector: Technology Communications Equipment Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 7/13/2017
NA NA 1.40 $11.1 Billion $68.75-$162.97 $154.77

RATINGS HISTORY VALUATION

Our rating for ARISTA NETWORKS INC has not BUY. ARISTA NETWORKS INC's P/E ratio indicates a significant premium compared to an average of 24.30 for
changed since 6/7/2016. As of 7/13/2017, the stock the Communications Equipment industry and a significant premium compared to the S&P 500 average of
was trading at a price of $154.77 which is 5.0% 24.41. For additional comparison, its price-to-book ratio of 9.06 indicates a significant premium versus the S&P
below its 52-week high of $162.97 and 125.1% above 500 average of 3.04 and a significant premium versus the industry average of 3.45. The price-to-sales ratio is
its 52-week low of $68.75. well above both the S&P 500 average and the industry average, indicating a premium. Upon assessment of
these and other key valuation criteria, ARISTA NETWORKS INC proves to trade at a premium to investment
2 Year Chart alternatives within the industry.
$200
HOLD: $83.52

BUY: $74.58

Price/Earnings 1 2 3 4 5 Price/CashFlow 1 2 3 4 5
$150 premium discount premium discount
ANET 50.25 Peers 24.30 ANET 50.19 Peers 15.13
$100 • Premium. A higher P/E ratio than its peers can • Premium. The P/CF ratio, a stock’s price divided by
signify a more expensive stock or higher growth the company's cash flow from operations, is useful
expectations. for comparing companies with different capital
2015 2016 • ANET is trading at a significant premium to its requirements or financing structures.
peers. • ANET is trading at a significant premium to its
peers.
MOST RECENT RATINGS CHANGES
Price/Projected Earnings 1 2 3 4 5 Price to Earnings/Growth 1 2 3 4 5
Date Price Action From To premium discount premium discount
6/7/16 $74.58 Upgrade Hold Buy ANET 33.11 Peers 21.83 ANET 0.88 Peers 1.07
8/10/15 $83.52 Initiated -- Hold • Premium. A higher price-to-projected earnings ratio • Discount. The PEG ratio is the stock’s P/E divided
Price reflects the closing price as of the date listed, if available than its peers can signify a more expensive stock by the consensus estimate of long-term earnings
or higher future growth expectations. growth. Faster growth can justify higher price
• ANET is trading at a significant premium to its multiples.
RATINGS DEFINITIONS & peers. • ANET trades at a discount to its peers.
DISTRIBUTION OF THESTREET RATINGS
(as of 7/13/2017) Price/Book 1 2 3 4 5 Earnings Growth 1 2 3 4 5
premium discount lower higher
43.81% Buy - We believe that this stock has the ANET 9.06 Peers 3.45 ANET 71.11 Peers 9.93
opportunity to appreciate and produce a total return of • Premium. A higher price-to-book ratio makes a • Higher. Elevated earnings growth rates can lead to
more than 10% over the next 12 months. stock less attractive to investors seeking stocks capital appreciation and justify higher
with lower market values per dollar of equity on the price-to-earnings ratios.
30.69% Hold - We do not believe this stock offers balance sheet. • ANET is expected to have an earnings growth rate
conclusive evidence to warrant the purchase or sale of • ANET is trading at a significant premium to its that significantly exceeds its peers.
shares at this time and that its likelihood of positive total peers.
return is roughly in balance with the risk of loss.
Price/Sales 1 2 3 4 5 Sales Growth 1 2 3 4 5
premium discount lower higher
25.50% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with ANET 9.10 Peers 3.02 ANET 35.71 Peers 10.55
the risk involved too great to compensate for any • Premium. In the absence of P/E and P/B multiples, • Higher. A sales growth rate that exceeds the
possible returns. the price-to-sales ratio can display the value industry implies that a company is gaining market
investors are placing on each dollar of sales. share.
• ANET is trading at a significant premium to its • ANET has a sales growth rate that significantly
TheStreet Ratings industry. exceeds its peers.
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This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: July 16, 2017 PAGE 5
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.