Arista Networks slips as Credit Suisse downgrades, citing worries over data center
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Arista Networks (NYSE:ANET) fell on Tuesday after Credit Suisse downgraded the networking equipment company, citing worries over a more challenging data center picture in 2023.
Analyst Sami Badri lowered the firm's rating on Arista Networks (ANET) shares to neutral from outperform and trimmed the price target to $110 from $185, noting that recent industry channel checks have not been positive.
"The big risk we see to Arista Networks is buy side expectations for 2023 revenue growth of 20% [or more] versus sell side expectations of ~15%, suggesting anything below 20% is likely to be receive negatively by shareholders from a guidance perspective," Badri wrote in a note to clients. 
Badri added that 20% growth or more is likely to be difficult to achieve for a number of reasons, including "deceleration" in hyperscaler capital expenditure spending from 23.2% in 2022 to just an estimated 2.1% in 2023. Other reasons include "elongated" data center development times, lower data center construction and the increase in the useful life of servers. 
There is also the potential for greater competition from Cisco (CSCO) and other white box vendors, as they appear to be less supply constrained, Badri added.
Arista Networks (ANET) fell 2.5% to $107.98 in premarket trading.
Earlier this month, Citi added Arista Networks (ANET) to its 30-day positive catalyst watch list, as the firm expects earnings to bring an inflection point.
Analysts are overwhelmingly positive on Arista Networks (ANET). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates ANET a STRONG BUY.