The Investment Opportunity of a Lifetime (Don’t Miss It)

The stock is going to make millionaires and most investors, as usual, are going to miss out because the one thing that separates great investors from average retail investors is one little thing. And that is the understanding that real life and the stock market are not much different. When you get a great deal for something of quality at a lesser price than normal, you should be happy about it. You should be hunting for these deals. And in real life, it's obvious. But in the stock market, 90% of investors don't think this way. And that is why 90% of investors lose consistently. In today's video, I'll show you a stock that has done this, 15% down year to date. At the same time, at the same period, we have seen the quality go up with 20% revenue growth and 83% free cash flow growth and a massive upside story that almost is unrivaled in its category. A lot to talk about today. Don't click nothing. Don't smash nothing. Don't buy nothing. Let's get to it. So first and foremost, let's start this presentation with one understanding. The fundamentals drive everything. As an investor, as a long-term investor, the fundamentals is where you start every single analysis. Now, before I name drop this stock, because I don't think this is the main part yet. I just want to show you the engine. I want to show you the quality so that you know what this thing has under the hood. Right now, we're looking at a company with $7 billion worth of sales with a 20% annual sales growth, $2.9 billion net income with 36% growth, $3.7 billion of free cash flow with 83% growth, no debt, no debt, just the way I like it, $8 billion of cash, 65% growth and a 42% operating margin. That is wild, especially since this is not a pure software business. They're actually making hardware. This is massive. Now, this company is currently trading at 37 forward PE and 15 times sales, which is not at all an abomination from a valuation perspective, and yet it is down 15% year to date. Now, let's actually go one step further. Now that I got your curiosity, now you're saying, well, what is this stock? We're curious, Tom. What are you talking about here? This stock is called ANET, A-N-E-T is the ticker. It's called Arista Networks. In fact, if you are a part of my community, if you are a part of my academy, the Royk Academy over at payton.com forward slash Tom Nash, we have been talking about this stock for the better part of two years, June 21st, 2023, two years ago, almost on the day. In that video, if you were a part of my community, you already knew this on time. I told you, hey, this stock is trading at $37 right now at the making of this video. And I think it's going to go up. Now, right now it's trading at $95, which means that the stock has done 155% since my post on it on June 21st, 2023. I think it worked out pretty well. And that is why I always say to my community members who want to thank me when the stock does really, really well over the past few months. Oh my God, Tom, this stock is up over the past two months. Don't thank me after two months. Judge me on my two-year record at minimum, probably better five-year record. So far, midway through this five-year record, this stock is up 155% since my video, but that's not about me bragging about it. That's not going to make you money. I mean, if you were not part of my community so far, I don't blame you. But if you just found me, welcome in. At this point, you might be saying to yourself, well, Tom, this is nice for you and your community, but how can we make money off of a stock that did 155% of the past two years? It already went up parabolically. There's nothing left. And there are some hard questions about the stock. I totally get it. Number one, as I just alluded to it earlier, this may be too late in 2025 when the stock did 155%. But I'm going to debunk this right away by quoting one of the greatest investors of all time, Mr. Peter Lynch. Now, Peter Lynch, in my opinion, should be on the Mount Rushmore of investors and for a good reason. He's definitely one of the greatest. And one of his most famous sayings is that it is never too late to buy into a great business. And the numbers definitely support that. I'll show you that in a second. We have multiple documented times where people have said this stock has already ran up and it does it again and again and again. Good companies go up. Bad companies, they sink. Peter Lynch said it. I agree with it. It is never too late to buy. That's not the question. OK, the question is a whole different story. Well, Tom, we understand what Peter Lynch has said, but how do we know it's a good company? I mean, look, the stock is down 15% year to date. Something must be wrong with it, right? Well, what's wrong here? Why did the stock drop so much year to date? And I think this is the real issue, right? This is the question I want to answer in today's video. I want to show you what happened. And if at all, it changes my thesis whatsoever. Of course, there's the third question, right? What would be my price target for this stock, assuming I'm still bullish for the next five years? Because at this point, we're in 2025. We're no longer in 2023 when I made my first video about it. What's in it for us as investors? How much can we make on this stock for the next five years? What is our potential in the stock? All questions I'm going to answer. I'm going to give you my price target. I'll talk about the risks. I'll talk about the upside. I'll share with you my whole thesis. Everything will be given to you for free. There is no paywall for this video whatsoever. You'll get every single thing for free. Stick around. You're going to learn something. Now, look, right now, a lot of people are concerned because they're saying, well, look, Tom, we get it. We appreciate you. We've been watching your videos for a while. But, you know, the stock did 150 percent, Tom. I mean, come on, show us something that's under the radar. Hold on a second. I want to show you a few examples. Peter Lynch wasn't just saying that it's never too late. It's literally in the numbers. I'm going to give you a few examples. Palantir, over the past two years, have doubled four times. NVIDIA, for the past two years, doubled four times. Microsoft doubled four times since 2018. Microsoft, the behemoth, doubled four times since 2018. Not that long ago. And I can give you examples here all day long. I'm going to run out of place. Even the ETF. If you look at the ETF side, the NASDAQ doubled four times in the past nine years. The S&P 500 doubled three times in the same period. It's never too late to buy good companies. Peter Lynch was not BSing you. He wasn't blowing smoke up your bottoms. OK, now let's move on. OK, but Tom, assuming that you're right, there's still the question of the drop. I mean, while everything up is running up like crazy right now, everything is exploding. We're nearing all-time highs again. Why is this stock lagging? There's something wrong with it, right? What happened? Let's dissect it, OK? So there were a few reasons, in fact, three reasons, why this stock took a little bit of a dive. A little bit of a dive, year to date. Meaning since the end of December 2024. The first reason, obviously, is the April mayhem. The April tariff mayhem. Basically, you know, it affected everybody. This stock was no different. But again, the April tariffs, whether it is the end of that story or the beginning of that story or the middle of that story, I don't care because the April tariffs are not company-related. Because they're not company-related, I don't care, OK? That's not part of my thesis about this stock. The tariff situation is something that impact the entire stock market. Not going to look at this stock particularly. Number two, a lot of people, a lot of people, were disappointed when the CEO came out in the earnings call in May, not that long ago, and said, look, folks, we beat bottom, we beat top, everything is great. I mean, we've beat across the board, but we're not raising guidance. We're not raising guidance. And immediately, people started saying, well, this is proof. This is the proof, the evidence that the CAPEX spending, the spending of the hyperscalers and data centers is actually starting to erode. Otherwise, why wouldn't they raise guidance? Well, maybe because they're responsible. Maybe because they're not hyping it up. We've seen the NVIDIA numbers after these guys and the CAPEX cycle of the hyperscalers is nowhere near to be slowing down. So this whole thesis, again, is in the toilet. So now we're left with the real reason, and this is it. NVIDIA basically announced that they're launching, they're all like their own Ethernet switches called Spectrum X. Now, we'll talk about what Ethernet switches are and why it's important for ANET. But basically, to put it into one sentence, NVIDIA came out and said, look, we're going to compete with ANET and we're launching our own product. And ANET dropped 6% on that day. When NVIDIA comes out and says, we're going to compete with you guys, obviously, nobody wants to compete with NVIDIA. So the talk of the town was, oh my god, this is a huge risk for ANET, et cetera, et cetera. And it sold off, right? Now, we have to be methodical about this because these sort of opportunities don't come often. And I believe that the name here, NVIDIA, and the fear, oh my god, this whole thing is a little bit overblown. And I'll explain why. And you can challenge me by going in Google, talking to experts, which is two things that you should have been doing anyways. But I've been talking to experts again in this industry. And what I'm telling right now comes from the mouths of some really, really smart people who understand this business and this environment a lot better than me. Allow me to elaborate what I'm talking about. So basically, what ANET does, it provides switches and routers. Well, we all know what routers are. You have one at home. But basically, that's the idea. Switches, essentially, I'll talk about what exactly they do. But essentially, they connect multiple computers. Switches basically move such high-speed volumes that you wouldn't even understand. I mean, we're used to downloading films at home, right? So you download a film in 4K, right? So the switch that ANET actually provides for high-performance computing for data centers, just to give an example, can download 32 4K films at the same time. And it can do it in one second. So that switch we're talking about here can handle traffic of downloading 32 4K films in one second, okay? So this is a whole different enchilada. This is for data centers. This is not for home use. But basically, these switches, they connect all these data centers and they allow them to operate as one unit. Now, they also provide the software, the operating software called the EOS. And this is the important part here. I want you to remember this name, EOS. This is basically what connects the hardware. And the whole platform on which this whole thing operates, called Cloud Vision, this is where this whole thing is managed from, okay? Now, you can do it by running endless amounts of cables and connecting each single computer to each single computer, etc., etc. Or you can put it all on a switch. One switch connects many, many computers and that switch connects to the main switch and so forth and so forth. Basically, this is how data centers operate. These switches are the hardware beating heart of data centers. Now, I've actually ran a little bit of a chart here for people like me who are not very technical. And I want to show you how important this is in the data center environment, right? So, you've got the computers. These are the stacks. This is where NVIDIA chips are, right? This is where, so far, the money went on the CAPEX site, right? But these computers are stacked, right? But they're connected through switches of ANET. Now, these switches, each single switch is... And each switch is connecting to the main switch. And that main switch is connected to the Cloud Vision. And they all run on EOS, which is the operating system of ANET. You have to understand that the entire architecture of the data center environment as we know it today is literally almost 100% built on EOS. This operating system, on which almost every single data center in the world is operating on, is not just extremely sticky. This would be like tearing out your lung and your heart and your leg at the same time. It's going to be very, very hard, excruciating. And you probably will die because at the end of the day, there is no alternative. Switching from this is virtually impossible. I mean, it's technically possible, but the cost, the resources, it's going to be literally like teaching all of your employees to speak a different language and start working in this little different language within a single day. It's going to be very, very hard, impossible. And why would you engage in this when you have a product that is terrific, it works, and the switches are great, it's all proven. Why would you do this? To save a few dollars? Not sure. Because this system here is so embedded, it's going to be very, very hard to disconnect from. Okay. Number two, you also have to understand that even if there is some NVIDIA sales, sure, that's fine, but the total addressable market is growing. We have more and more clients for these things. It's now not just the hyperscalers and the cloud services providers, we're talking about companies, banks, schools, universities, there's massive data center expansion going on. The pie is getting much, much bigger. So even if NVIDIA takes a little bite, the overall pie is still going to grow and ANET is going to make a lot of money. It's premature to bury ANET because NVIDIA started talking about their own switches. So to me, the chart of how to behave as a potential investor is very, very simple. So can it drop very, very hard? Sure, it can. Any company can in any market. Macro, anything can happen, right? So if it drops very hard, what do you do? Well, you ask yourself a question. Is this company related? If it's not company related, you DCA. And if it drops 20% below the 52-week high, you double down. But what if it is company related? Well, in that case, is the thesis broken? Yes. Well, if the thesis is broken, then you no longer want to be an investor, sell. What if the thesis is not broken? The thesis not changed. Well, in that case, you go back to square one and you DCA and you keep on buying. It's very simple. You shouldn't be hoping or praying. If the price drops, you have your plan. We don't predict, we prepare. Now, for those of you who last this long, here is my five-year price target for ANET. Currently trading at $95 per share. My bear case is $191, 102% upside. Medium case, $234, 147% upside. And my bull case is $277, 193% upside. Now, I've actually made a whole list of the top 10 data center stocks to be actually looking into right now. Most of them are completely under the radar because everybody's looking at NVIDIA. These are the sort of stocks you need to be looking at, not the overhyped things that all of investors, mainstream media, social media is talking about. This list is available as well as 55 other lectures on how to become a better long-term investor, as well as my top stocks list, as well as my Discord. Everything is accessible on my ROIC Academy members. It is on patreon.com forward slash TomNash. We're now past 20,000 members for a good reason. Would love to get you in the Academy, have you test drive it. If you don't like it for any reason, 30 days money-back guarantee, no questions asked. I would love to see you there at no risk to you. Join us. Our upcoming lesson is this Sunday. Join before, come over, say hello, say you're new. Would love to see you there. I'll see you next one, peace.