When one tech giant is given a positive analyst call, it can frequently be because one is taking market share from a key rival. So, what are investors supposed to make of it when one analyst team upgraded Juniper Networks Inc. (NYSE: JNPR) ahead of the Cisco Systems Inc. (NASDAQ: CSCO) earnings report, and then the same research team remained very positive on Cisco after the earnings report?

Merrill Lynch’s tech and communication team raised Juniper to Buy and maintained its Buy rating on Cisco within 48 hours around Cisco’s earnings report.

Juniper has been considered “the smaller Cisco” for years. The two companies have competed for years as well, with Cisco being larger and generally being considered as having a broader offering. Can both companies grow at the same time when giant telecom and communications orders are highly competitive? 24/7 Wall St. has highlighted why Merrill Lynch sees room for both Juniper and Cisco to grow simultaneously.

Juniper Networks was raised to Buy from Neutral on Tuesday, just a day before Cisco’s earnings. The Merrill Lynch price objective was also raised to $34 from $27, versus a prior $27.09 closing price, with a note that a broad new product cycle covers multiple domains around a new spending recovery.

The team said:

Our upgrade is based on our anticipation that core business lines will inflect and return to year over year growth later this year, driven by a plethora of new product releases and sequential growth in North America carrier spending. Additionally, following Juniper’s restructuring and share buybacks, operating margins and earnings per share (EPS) leverage should be enhanced. New products touch all areas including switching, edge and core routing, security, and NFV.

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That new $34 price objective is based on based on 16 times the firm’s 2017 EPS estimate of $2.13. This was said to be in line with Juniper’s trailing average of 17 times over the past five years. With a needed refresh, there was a potential inflection in three core businesses: switching, security and routing.

The firm said:

We believe the company’s three core product lines will reach an inflection and return to growth over the next few quarters. Catalysts for growth include expected increases in carrier capex for the remainder of the year and new products that have a strong performance advantage. Headwinds to Juniper’s security business should also end with the winding down of old businesses and the previous disposition of Pulse.

Juniper’s five-year decline in security was attributed to an aging SRX platform that lost its luster, but that is now being upgraded. Still, they do address a competitive landscape today. The success of its switching portfolio has been lackluster so far, and new products from Dell, HP and revamped Cisco only make things more challenging. Lastly, the security market is competitive and Juniper will have to prove its throughput advantage outweighs the platform approach of other vendors.

Cisco shares were reiterated as Buy and with the same $32 price objective. That implied upside of about 10% from the $29.10 late-Thursday share price, without taking the 3% yield from the dividend into consideration. Merrill Lynch’s implied upside on Juniper was closer to 25%, if you include Juniper’s 1.5% yield.

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While Merrill Lynch called John Chamber’s last full quarter as CEO a solid one, the firm also said that its main product lines still in transition. The team said:

The company continues to execute reasonably well, yet the trends are somewhat mixed. On a year over year basis, we saw growth in every business except SP video. However, similar to last quarter, we mostly attribute this to easy comps, with the sequential trends more mixed. Switching, collaboration, data centers, wireless and security were all down quarter over quarter, with switching and security down for two consecutive quarters. It’s hard to read into the sequential trends given a lack of historical seasonal consistency and management’s commentary on strong order trends, yet holistically, we flag the associated risks.

All in all, Merrill Lynch thinks that Cisco is executing well in a tough environment and new products should contribute to growth in key segments. They also like Cisco’s cash flow generation, low relative valuations and dividend yield. The team further liked to see a strong seasonal recovery in routing, sequential growth in SP Video, product gross margins increased and strong U.S. sales. Still, the growth was not consistent across all regions, with 8% U.S. growth being dragged down by 2% growth in EMEA and a 1% drop in APAC sales.

Below are comments from each company’s earnings reports. Juniper issued preliminary earnings on April 23 and Cisco’s report was on May 13.

Juniper’s CEO Rami Rahim said:

We are off to a good start to 2015, delivering solid results for the first quarter and making significant progress against our key initiatives for the year. Our sharpened focus resulted in improved execution and momentum across our key customer verticals. Over the past few months, we announced enhancements to our portfolio with a new lineup of breakthrough-performance networking and security products and garnered several new design wins, with more anticipated in the pipeline. We are focused on profitable growth and driving forward our innovation engine, and believe we are well positioned in achieving our goal of realizing Juniper’s full potential.

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Juniper’s Robyn Denholm, chief financial and operations officer, said:

During the quarter, we delivered good year-over-year non-GAAP operating margin and earnings per share expansion, through continued management of our cost structure. We also continue to benefit from our focus on customer diversification and we see broader healthy demand trends beginning to emerge. Meanwhile, we continue to deliver on our capital return commitments, driving additional shareholder value.

John Chambers, the exiting CEO of Cisco, said:

Cisco is in a very strong position and we delivered another solid quarter. Our vision and strategy are working and we are executing very well in a tough environment, as evidenced in our revenue growth, profitability, strong gross margins and cash generation. Our customers feel the pace of change and disruption in every industry and market, and know their success depends on digitizing their business. Whether they are the disruptor or the incumbent, they are coming to Cisco as their strategic partner. We believe we are pulling away from our competition using the same formula we’ve always used: integrating our industry-leading products in every category into architectures and solutions that deliver real outcomes. We’ve created this opportunity and it is ours to execute.

I am extremely honored and proud to have led Cisco for the last 20 years and to get us to this positive inflection point. We have a tremendous opportunity to extend our lead in the industry, and with Chuck Robbins as the CEO for Cisco’s next chapter, we have exactly the right leader to capture that opportunity. I could not be more confident in our future.

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24/7 Wall St. would conclude with the reminder that it is not unusual for the same analyst team to like multiple stocks in the same sector. Still, the winning of one big deal in communications equipment and services has for years now meant that another competitor lost out on the order.

Maybe Cisco and Juniper both have enough opportunities where they can both win. Stay tuned.

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