Today’s Research Reports on Stocks to Watch: Arista Networks and Cisco Systems
A report that Amazon’s AWS is considering selling generic networking equipment at cheaper prices sent shares of networking companies Cisco Systems and Arista Networks into the red on Friday.
RDI Initiates Coverage on:
Arista Networks, Inc.
Cisco Systems, Inc.
Arista Networks, Inc. shares closed down a little over 4% on Friday with about 1.4 million shares traded. A report said that Amazon’s Amazon Web Services (AWS), which has used internally-designed networking gear in its own data centers, is considering selling own data center switches to businesses. According to a source familiar with the situation, Amazon may launch the switches within 18 months, and could price them at a 70% to 80% discount relative to comparable hardware. Rival Arista Networks felt the burn of the news the same way Cisco did, with both stocks dropping over 4%. The report has also cautioned that Amazon may decide against bringing them to market. This is just speculation right now.
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Cisco Systems, Inc. shares closed down 4.13% on about 47 million shares traded this past Friday. The stock saw losses as traders worried about a report from TheInformation’s Wayne Ma and Kevin McLaughlin, that said that Amazon.com’s Amazon Web Services unit is “considering selling its own networking switches for business customers." The report cited an unnamed source. According to the authors, Amazon would use pricing to “undercut” Cisco and others, perhaps selling “white-box” switches, at a 70% to 80% discount to typical prices. Analyst Mitch Stevens with RBC Capital Markets wrote in a note, "If true, we think this would be a notable negative for the networking equipment space going forward." Separately, analyst Arjun Menon of Goldman Sachs believes cybersecurity stocks including Cisco, which offers variety of security products, could see short term gains ahead of the 2018 midterm elections. He wrote, "Recent press reports suggest rising concerns about the possibility of meddling in the U.S. midterm elections this November." He added, "A rise in allocation to security spending – the top spending priority among chief investment officers according to the most recent GS IT Spending Survey – in anticipation of potential threats would boost the top-line of cybersecurity stocks.”
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Our Actionable research on Arista Networks, Inc. (NYSE: ANET) and Cisco Systems, Inc. (NASDAQ: CSCO) can be downloaded free of charge at Research Driven Investing.
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