Tuesday's IBD 50 Stocks To Watch pick, AI stock leader Arista Networks, is one of the best stocks to buy and watch right now, as it approaches a fresh buy point in today's stock market action. ANET stock traded up 2% midday Tuesday, just 2% away from its latest buy point.
Arista sells computer network switches that speed up communications among racks of computer servers packed into "hyperscale" data centers. These internet data centers are designed to ratchet up computing horsepower when demand surges.
In the latest reported quarter on May 1, Arista Networks reported better-than-expected first-quarter earnings and revenue. The company's earnings jumped 70% to $1.43 a share vs. the year-ago period. Sales grew 54% to $1.35 billion.
Despite the strong results, the stock plunged 15.7% on May 2 as analysts fretted over the company's updated full-year outlook. For the June quarter, Arista predicted revenue in a range of $1.35 billion to $1.4 billion, barely exceeding estimates of $1.35 billion.
Second-quarter results are due out July 31. Wall Street expects the AI stock leader to earn $1.44 a share on sales of $1.37 billion, representing year-over-year increases of 33% and 31%, respectively. That's still strong, but markedly slower than Q1's growth.
AI Stock Leader's IBD Ratings
Boasting a strong long-term fundamental track record and big double-digit earnings growth in recent quarters, ANET stock shows a near-perfect 98 Earnings Per Share Rating, according to IBD Stock Checkup. This rating takes into account EPS growth and stability of earnings over the past three years. The two most recent quarters are weighted more heavily.
ANET stock displays a 97 out of a perfect 99 IBD Composite Rating, due to strong fundamentals in the latest quarters along with big upside price moves since June 2022. The IBD Composite Rating is designed to help investors easily gauge the quality of a stock's fundamental and technical metrics.
Networking Leader Is One Of Best Stocks To Buy And Watch
ANET stock surged in late May on views that if tech companies are buying more AI chips, they'll also invest in computer networking bandwidth.
After peaking on May 30, the networking leader has built a cup base with a 178.36 buy point, per IBD MarketSmith chart analysis. Shares are about 2% away from their latest entry amid Tuesday's over-2% midday rise.
Keep an eye out for a potential handle to offer a lower entry.
A key technical indicator to watch is the relative strength line. Currently, the RS line is lagging pretty far from its old highs, a sign that the S&P 500 is outperforming the AI stock leader in recent weeks. The RS line measures a stock's price performance vs. the S&P 500 and is the blue line plotted on every IBD chart. It should hit a new high on the breakout day or shortly thereafter.
Strong fundamentals and technicals make ANET one of the best stocks to buy and watch in today's stock market.
With the stock market in a confirmed uptrend, investors should be on the lookout for top stocks breaking out of basing patterns. Amid the ongoing stock market pullback, IBD recommends exposure in stocks at 80% to 100% of your portfolio, according to IBD's The Big Picture.
Best Stocks To Buy And Watch
Three recent IBD 50 Stocks To Watch picks, which are among the best stocks to buy and watch.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| AAON | 100.46 | Cup with handle | |
| On Holding | 33.68 | Cup with handle | |
| Celsius | 141 | 10-week support |
Source: IBD Data As Of July 18
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
