With its legal battle with Cisco (NASDAQ: CSCO) over alleged patent infringements still unresolved, Santa Clara, California-based Arista Networks (NYSE: ANET) stock is nearing rarefied air. After jumping 7% on Monday following the news that import restrictions on the company had been lifted, and further gains in early Tuesday trading, Arista is a whisker away from its all-time high of $94.84 a share.
Shareholders were already enjoying a nice jump in the stock price following its surprisingly strong third-quarter report and guidance for the current quarter. Prior to Monday’s sky-rocketing gains, Arista shares had climbed more than 8% from their pre-earnings release levels. Then Arista received a reprieve from its ban on the import of networking parts from Asia.
The legal back-and-forth began nearly two years when Arista was accused of violating five Cisco patents, along with several more associated with its switching products. In June of this year, it appeared Cisco had won a significant victory when the International Trade Commission ruled Arista had violated three of the five patents, and again recommended a U.S. import ban on the products using the technology, and a domestic sales cease-and-desist order.
Investors obviously appreciated the legal dark cloud over Arista’s head being lifted, as did industry watchers. Several analysts raised the tech company’s share price target, with one bumping it as high as $110 from $93.
The lifting of the import ban should also help Arista retain its existing gross margins. There were concerns that costs associated with ramping up its U.S. manufacturing would impact margins, but for now at least, Arista is ready to take on Cisco and others stateside using imported parts.
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