The rising consumer electronics adoption drives the market for next-generation wireless communication. The increasing demand for smooth and dependable communication networks in different applications such as medical care, defense, and public safety drives the next-generation wireless communication industry. The market is projected to grow at a CAGR of 17.8% by 2032.
Additionally, the growth of the communication and networking equipment market is significantly driven by escalating investments from both governmental and business sectors. Governments worldwide are prioritizing the enhancement of communication infrastructure to bolster economic growth, public safety, and digital governance.
Against this backdrop, let’s compare two established networking stocks to analyze which networking stock is better positioned for the future: Arista Networks, Inc. (ANET) and A10 Networks, Inc. (ATEN).
The Case for Arista Networks, Inc. Stock
With a $125.89 billion market cap, Arista Networks, Inc. (ANET) engages in the development, marketing, and sale of data-driven, client-to-cloud networking solutions for data center, campus, and routing environments. Its cloud networking solutions consist of an Extensible Operating System (EOS), a publish-subscribe state-sharing networking operating system offered in combination with a set of network applications.
ANET’s stock has gained 69.7% over the past nine months to close the last trading session at $399.72.
In terms of forward non-GAAP P/E, ANET’s 45.58x is 78.2% higher than the 25.57 industry average. Its 35.69x forward EV/EBITDA is 129.2% higher than the 15.58x industry average.
ANET’s revenue for the third ended September 30, 2024, increased 7.1% year-over-year to $1.81 billion. Its non-GAAP net income increased 32.3% year-over-year to $769.10 million, and its non-GAAP net income per share grew 31.1% year-over-year to $2.40.
Street expects ANET’s EPS and revenue for the fiscal fourth quarter ending December 2024 to increase 8.8% and 23.3% year-over-year to $2.26 and $1.90 billion, respectively. Moreover, the company surpassed revenue and EPS estimates in each of the four trailing quarters.
ANET’s POWR Ratings reflect mixed prospects. It has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ANET is ranked #22 out of 45 stocks in the Technology - Communication/Networking industry. It has a C grade for Growth, Momentum, and Stability. To see ANET’s Sentiment, Quality, and Value ratings, click here.
The Case for A10 Networks, Inc. Stock
Valued at $1.22 billion by market cap, A10 Networks, Inc. (ATEN) provides networking solutions. The company offers Thunder Application Delivery Controller, which provides advanced server load balancing, and Thunder Carrier Grade Networking, which provides standards-compliant address and protocol translation services between varying types of internet protocol addresses.
ATEN’s stock has gained 34.7% over the past year to close the last trading session at $16.49.
ATEN’s forward EV/EBITDA of 15.25x is 2.1% lower than the 15.58x industry average. Likewise, its 18.03x forward EV/EBIT is 15.7% lower than the 21.39x industry average.
In the fiscal third quarter that ended September 30, 2024, ATEN’s revenue rose 4.4% year-over-year to $66.70 billion. The company’s non-GAAP net income and non-GAAP net income per share increased 32.5% and 31.3% from the prior year’s period to $15.90 million and $0.21, respectively.
Analysts expect ATEN’s revenue for the first quarter ending March 2024 to increase by 4.5% year-over-year to $63.39 million. Its EPS is expected to grow 9.7% year-over-year to $0.19 for the same quarter.
ATEN’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to Buy in our proprietary rating system.
ATEN has an A grade for Quality. It is ranked #12 in the same industry.
Click here for the additional POWR Ratings for ATEN (Momentum, Sentiment, Value, Stability, and Growth).
Arista Networks, Inc. (ANET) vs. A10 Networks, Inc. (ATEN): Which Networking Stock Is Better Positioned for the Future?
The significant shifts in the size of the market for connection services, as well as the rising demand on a worldwide scale, are opening up several options. Furthermore, introducing dependable internet and information services as a need during the epidemic has resulted in worldwide alliances, thus driving growth in the networking industry.
Leading networking companies ANET and ATEN stand to capitalize on the optimistic industry outlook. However, ATEN’s lower valuation and promising near-term outlook favor it as the better networking stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology - Communication/Networking industry here.
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ANET shares were trading at $410.00 per share on Tuesday afternoon, up $10.28 (+2.57%). Year-to-date, ANET has gained 74.09%, versus a 27.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
Arista Networks (ANET) vs. A10 Networks, Inc. (ATEN): Which Networking Stock Is Better Positioned for the Future? StockNews.com
