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Cisco and Arista Get Downgraded as Citi Sees Tougher Spending Outlook -- Barrons.com Cisco and Arista Get Downgraded as Citi Sees Tougher Spending Outlook -- Barrons.com Dow Jones By Eric J. Savitz Networking equipment suppliers Cisco Systems and Arista Networks face permanent demand impairment from the side effects of the Covid-19 pandemic, Citigroup analyst Jim Suva warns in a research note. Suva cut his ratings on both Cisco (ticker: CSCO) and Arista (ANET) to Neutral from Buy. "It is clear to us that business and life will not return to the pre Covid-19 normal," he writes in a research note. "While we recognize there is likely a permanent shift to a more flexible work environment, we have found most companies have figured out how to fully support all employees working from home, all employees returning to the office, and any combination of home versus work location. This has led to additional cloud and white box adoption and less... demand for enterprise equipment. Accordingly we are downgrading both Cisco and Arista." Suva asserts that corporate customers are "elongating their asset useful life and shifting purchasing decisions to other initiatives." He thinks both Cisco and Arista "will pivot to making more M&A to try to stem the slowdown in... product demand." The analyst concedes that "year-over-year comparisons are easy" next year, but he sees "both risk to sales and the potential for a compression on valuation multiples." Shares of Arista were off 1.2%, to $224.98, on Monday, while Cisco was up 0.8%, to $40.16. |
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