In a note released Wednesday morning, Morgan Stanley analyst James Faucette Initiated coverage on Juniper Networks JNPR with an Equal-weight rating, but has yet to set a price target.
To begin the note, Faucette acknowledged that Juniper recently implemented an "aggressive" operating plan inline with the requests of activist shareholders.
He believes that the consensus estimates for revenue growth rates, due to the new operating plan, of 200-300 basis points above networking and equipment growth rates are "reasonable." However, he views the consensus of an implied 13 percent terminal EPS growth rate to be "clearly to high."
According to Faucette, the new operating plan has the company returning to 25 percent margins by 2015, instituting an "aggressive" capital return plan of $3 billion over the next three years, issuing a $0.10 quarterly dividend and focusing R&D to the needs of "cloud builders."
Looking forward, Faucette believes Juniper will face a highly competitive market in the "cloud builders" segment and says this may potentially limit the upside.
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