There is no doubt that Arsenal can face any team in Europe but the problem is not to face but to win. Bayern Munich won them to qualify for the semifinals which showed that even in Bayern weak form, they were still able to win the club in their peak form. Can you see the difference now.
It is not by being in your peak form in domestic league and you feel that you are very strong. UCL is a competition for champions but not everyone that participate in the competition is a champion. Arsenal should stop dreaming and face reality for them to have a winning mentality.
When Arsenal made it to the quarter-finals, statistically Arteta squad was one step ahead from the previous few seasons. We realize that competition in the Champions League is not just about attributes, but reputation and mentality play an equally important role, regardless of a team consistency at domestic level. Luck is also expected, such as joining an easier group, and facing opponents from a balanced path, such as Dortmund journey last season to reach the final. Arsenal is not yet comparable to Bayern Munich in many ways, maybe in the future they can be successful by winning their first Champions League trophy and changing the history of the club.