Arista, Cisco remain Overweight as networking spend to climb by year’s end: MS

Arista Networks (NYSE:ANET) and Cisco (NASDAQ:CSCO) both retained Overweight ratings as networking spend is expected to improve towards the end of 2024 and into 2025, according to Morgan Stanley.

Despite current weakness in the networking spend environment, a survey of chief information officers shows that trend coming to a halt by year’s end, according to a Wednesday note by Morgan Stanley.

“There is optimism from enterprise resellers about CY25 as we emerge from inventory digestion, as checks indicate that demand will be strong, driven by increased connectivity needs,” said Morgan Stanley analysts Meta Marshall and Mary Lenox.

Arista has dropped about 6% over the past five trading days.

“We believe ANET is in a better place after the past week’s sell-off,” Marshall added. “We would be buyers between $250-260, however probably don’t need to jump in above that given few catalysts into FQ1.”

Morgan Stanley has a price target of $300 on Arista. Meanwhile, it has a price target of $58 on Cisco.

“CSCO’s valuation dislocation has grown too wide, with CSCO trading at near-record discount to S&P, despite CIO survey noting healthy growth environment for networking once we get past inventory digestion, and Splunk doesn’t need to be a huge success for the stock to work,” Morgan Stanley notes.

Analysts are bullish on Arista. It has a Buy rating from both Seeking Alpha and Wall Street analysts. It has a Strong Buy rating from Seeking Alpha’s quant system, which routinely beats the market.

Cisco also has a Buy rating from both Seeking Alpha and Wall Street analysts. However, it maintains a Hold rating from Seeking Alpha’s quant system.