We recently compiled a list of the Jim Cramer’s Latest Game Plan: 15 Stocks to Watch.In this article, we are going to take a look at where Arista Networks, Inc. (NYSE:ANET) stands against the other stocks in Jim Cramer’s latest game plan.
Jim Cramer, host of Mad Money, recently weighed in on the factors that will shape market movements this week, pointing to the Federal Reserve’s upcoming meeting and a slew of corporate earnings reports as key developments. However, despite the importance of these earnings, Cramer believes that the presidential election will take center stage and dominate the market’s attention.
While acknowledging the significance of the election, Cramer emphasized that the Federal Reserve’s next decision is perhaps even more crucial for the markets. He noted that the bond market has been moving in an unfavorable direction, with the situation further complicated by a disappointing non-farm payroll report.
Though this report was skewed by hurricanes and labor strikes, it initially sparked a positive reaction in the bond market, pushing rates lower. Cramer had hoped that this would signal a positive shift, but the optimism was short-lived, as bond sellers quickly drove rates back up to their highest levels since early July.
“In my opinion, the Fed needs to cut rates again. In the last couple weeks, we’ve heard from too many businesses that have made it clear that we have a real slowdown on our hands. Economy’s a little shaky.”
Cramer also reflected on the Fed’s decision to reduce rates in September. He acknowledged that the bond market reacted negatively to the rate cuts at the time despite an economy that appeared relatively strong and a healthy labor market. Cramer discussed the possibility that if the Fed were to cut rates again, the market could see another unfavorable response. However, he remained unconcerned about this potential backlash, arguing that a rate cut could help to generate optimism in certain sectors.
“At this point in my view, if the Fed cuts rates next week, psychologically there’s some hope that we could see a pickup, particularly in housing and autos, two industries that seem to be losing strength by the day.”
Cramer highlighted that both presidential candidates appear willing to expand the federal budget. His main concern, however, was whether either candidate would be able to push their proposed agendas through Congress, a process he described as extremely difficult. Cramer noted that, in his opinion, presidential candidate Trump would likely be a bigger proponent of increasing the budget deficit than presidential candidate Harris, particularly due to the tax cuts Trump favors, which tend to result in larger deficits.
Stating his bottom line, Cramer said:
“… At the end of the day, the market’s still going to be hostage to the election, and perhaps more important, to the Fed meeting.”
Our Methodology
For this article, we compiled a list of 15 stocks that were discussed by Jim Cramer during the episode of Mad Money on November 1. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician in a server room managing a large-scale network of computers.
Number of Hedge Fund Holders: 65
Calling Arista Networks, Inc. (NYSE:ANET) stock a buy, Cramer remarked:
“The best networking story to own out here is Arista. That’s right. It’s a hyperscaler helper and it makes network switching equipment that’s ubiquitous in the data center. It reports after the close Thursday and it is a buy.”
Arista (NYSE:ANET) provides networking solutions for data centers, campuses, and routing, including AI-driven switches and software for automation, monitoring, and security. It offers post-sales support and serves industries like internet, finance, and telecommunications through various sales channels. Network switching equipment is hardware used to manage and direct data traffic within a computer network.
According to the company, it serves over 10,000 customers globally, with a total of 100 million ports deployed worldwide. In June, the company introduced a new product called the Etherlink AI platform. This platform is designed to be fully compatible with a specific standard for Ethernet, which is a type of network connection. Essentially, it helps different types of network equipment work together more easily.
During its Q2 earnings call, Arista (NYSE:ANET) management highlighted that the company is positioned as a pure-play networking innovator, with a total addressable market (TAM) exceeding $70 billion. The company also emphasized that 2024 is expected to be a year marked by the introduction of new products, the acquisition of new customers, and expanded use cases for its solutions.
For 2024, it set its revenue growth guidance for 2024 at a minimum of 14%. Additionally, the company’s gross margin outlook is forecasted to remain between 62% and 64%, while its operating margin projection has been raised to approximately 44%.
Overall ANET ranks 4th on our list of the stocks in Jim Cramer’s latest game plan. While we acknowledge the potential of ANET as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ANET but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
