Top Tech Stocks to Watch in February: Arista Networks and Robinhood Markets

Chicago, IL – February 10, 2025 – Today, Zacks Investment Ideas feature highlights Arista Networks (ANET), Microsoft (MSFT), Meta (META), and Robinhood Markets (HOOD).

Solid Picks for Long-Term Growth: ANET and HOOD

Despite challenges like developments in artificial intelligence and tariff concerns, Wall Street’s bullish sentiment has remained strong at the beginning of 2025. The S&P 500 and Nasdaq index have stayed close to their 50-day moving averages, indicating stability after the post-Trump election volatility.

This steady start to 2025 helps cool a previously overheated market, with mostly positive earnings results and guidance observed across sectors.

Stay Ahead of Earnings: Utilize the Zacks Earnings Calendar

In today’s edition of Full Court Finance at Zacks, we explore two stocks with a Zacks Rank #1 (Strong Buy) – Arista Networks and Robinhood Markets. These companies are positioned for potential gains ahead of their earnings reports.

Arista Networks: A Strong Buy Amidst AI Growth

Arista Networks has experienced remarkable growth, with its stock rising 75% over the past year, significantly outperforming the Zacks Tech sector. This performance is part of a broader trend that has seen ANET excel over the past decade.

Following a brief dip due to the DeepSeek news, Arista is now back above key technical levels but still trades 10% below its recent highs as it prepares for its Q4 2024 earnings release on February 18.

Focusing on client-to-cloud networking solutions, ANET has expanded rapidly to meet the demands of AI, data centers, and cloud computing. Notably, two of its biggest clients, Microsoft and Meta, are heavily investing in their AI infrastructure despite the recent headlines.

Arista’s revenue surged from $361 million in 2013 to $5.86 billion in 2023, with a notable average growth of 37% in the last three years. Expectations are for revenue to rise by 19% in FY24 and by 18% in FY25, reaching $8.18 billion.

The firm’s adjusted earnings are also forecasted to grow by 26% in 2024 and 10% in FY25, following a robust 52% EPS growth in FY23. With ongoing upward revisions to earnings estimates, ANET holds a Zacks Rank #1 (Strong Buy) and has exceeded earnings estimates by an average of 15% over the last four quarters.

Additionally, Arista boasts a strong financial position, featuring $7.4 billion in cash and equivalents, nearly $13 billion in total assets, and no debt to speak of, with just $3.6 billion in total liabilities.

However, ANET’s valuation could be a factor holding its stock back, trading at 52 times forward earnings compared to the tech sector’s average of 26 times. Nonetheless, Wall Street has consistently rewarded this company over the last decade, celebrating its leading role in the networking infrastructure industry.

Over the past ten years, ANET stock has skyrocketed about 2,800%, far surpassing Meta’s 840%, Microsoft’s 850%, and the tech sector’s overall growth of 320%. The stock has notably increased by 240% over the past two years and 45% in the last six months.

While ANET experienced a dip due to the DeepSeek news, it quickly rebounded above its 50-day moving average, transitioning from overbought conditions to a more balanced state.

Robinhood Markets: A Rising Star in the Trading Arena

Robinhood Markets has captured attention on Wall Street with a remarkable 385% increase over the past year, including an 80% rise in the last three months. The trading app is now a serious competitor among established brokers like Fidelity.

As the company prepares to announce its Q4 results on February 12, Robinhood is looking to surpass its previous highs set in 2021.

Revolutionizing the online broker industry, Robinhood was the pioneer of commission-free trading, a feature now widely adopted. What began as a popular trading app during the pandemic has evolved into a noteworthy contender with a diverse user base.

Robinhood has diversified, offering retirement accounts, cryptocurrency trading, and futures contracts. In October, it introduced Robinhood Legend, a trading platform aimed at active traders.

The firm is also moving into wealth management, having agreed in November to acquire TradePMR, a platform tailored for Registered Investment Advisors (RIAs). Furthermore, Wall Street responded positively to Robinhood’s resolution of its SEC settlement in January.

In terms of user engagement, Robinhood saw a 7% year-over-year increase in monthly active users, reaching 11 million in Q3, with average revenue per user growing 31% to $105. Moreover, the company recorded a 76% year-over-year growth in Assets Under Custody, now totaling $152.2 billion, fueled by strong net deposits and rising market valuations.

Looking ahead, Robinhood is projected to shift from an adjusted loss of -$0.61 per share last year to a profit of +$0.97 per share in 2024, with an additional 22% growth in earnings expected for the following year.

In recent months, Robinhood has seen significant upward revisions in its earnings outlook, with expected jumps of 20% for FY24 and FY25 landing it a Zacks Rank #1 (Strong Buy).

The company’s revenue for FY24 is expected to rise by 54%, reaching $3.53 billion compared to $1.9 billion in 2023, marking a promising path for growth.

However, HOOD shares have faced some challenges recently and may find resistance near the highs set post-IPO in 2021. Following a dip on Thursday, the stock could test either its 21-day or 50-day moving averages based on future guidance.

Lastly, Robinhood’s valuation shows improvement, currently trading at a 44.9 times multiple of forward 12-month earnings, offering a 50% discount compared to its peak valuations. Its PEG (price-to-earnings growth) ratio stands at 0.7, lower than the Finance sector’s 1.3 and Tech’s 1.7.

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