Is This the Start of the Analyst Upgrade Cycle for Juniper?

By Chris Lange Published Sep 19, 11:50AM EDT

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Juniper Networks Inc. (NYSE: JNPR) stock has seen a relatively flat year so far, and for the most part this is reflected in the analysts’ calls. However, one analyst broke away from the consensus and issued an upgrade. As we’ve seen with other companies before, sometimes it just takes one analyst to start a chain reaction.

Nomura/Instinet upgraded Juniper to a Buy rating from Neutral and raised the price target to $34 from $28. This implies upside of 18.9% from the most recent closing price of $28.59.

Jeffrey Kvaal, the analyst on the call, detailed in the report:

We believe Juniper will finally be able to catch the webscale capex growth tailwind in 2019. We expect Juniper to recover from its webscale routing annus horribilis, gain share in webscale switching, and continue its enterprise growth. New security and routing products may be an ephemeral salve for the service provider unit. We lift our 2019 sales estimate to 5% from the consensus 3%, which lifts our target to $34 and our rating to Buy. Juniper’s analyst day is 11/9.

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Overall, the firm expects webscale spending to remain the key market growth driver. Specifically, the webscale capex is expected to rise 40% in 2018. Instinet’s out-year forecast — currently 16% for 2019 — has typically proven conservative.

Instinet is confident Juniper’s declining webscale revenue in 2018 results from lower PTX product series average selling prices. The firm does not believe Juniper’s dominant data center interconnect webscale routing share has slipped. As the MX to PTX series migration is about 80% complete, ongoing robust port growth should restore webscale routing growth in 2018.

Enterprise growth should remain solid going forward. Enterprise growth has recovered to 5% to 10%, aided by a security recovery. Contrail software and an EX series refresh are expected to at least hold growth steady in 2019 — the firm models 7%.

Instinet went on to say:

Our 5% sales growth estimate drives disproportionate EPS gains. We lift our prior consensus 3% growth estimate to 5%. The volume growth brings our margin estimate part way back to 2016 peaks and lifts our 2019E EPS from $2.05 to $2.14. Our $34 target is 14.0x our 2020E EPS of $2.40 (consensus is $2.20).

Shares of Juniper were last seen up 1.5% at $29.04 on Wednesday, with a consensus analyst price target of $26.79 and a 52-week trading range of $23.61 to $29.95.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.