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Sell-Side Reactions To Juniper's Q1 Warning

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Shares of Juniper Networks, Inc. (NYSE: JNPR) plunged 10 percent after the networking gear maker slashed its earnings and sales outlook for the first quarter.

Let's take a look at the sell-side reaction over the news.

UBS – Rating Cut To Neutral, PT Trimmed To $25

UBS' Steven Milunovich downgraded the rating for the company to Neutral from Buy, while reducing the price target to $25 from $31.

"Although Juniper came into the quarter with macro concerns, we are surprised at the miss given cautious guidance, which may be reflective of general demand problems for enterprise vendors," Milunovich noted.

Citi – Neutral, PT Cut To $27 From $28

"Accordingly we believe Cisco saw similar weakness when they reported January quarter earnings on Feb 10th. We also note Juniper short interest has recently been increasing over the past 8-10 weeks. Within SMID Cap Comm Equipment, Ciena has significant overlap with Juniper at Tier-1 telecoms and we continue to prefer Infinera for its Cloud and Tier-2 Telco / Cable exposure."

"The revenue and EPS miss will likely create pressure not only on Juniper but also on F5 Networks (Neutral rating), Hewlett Packard Enterprise Co. (Neutral rating) and Cisco (Buy rating). However we note Cisco already reported and we would use any Cisco pull back as a buying opportunity. In addition this is a negative for our Sell-rated Celestica, given the >10% revenue from Juniper."

MKM Partners – Neutral, PT Cut To $26 From $27

"We are not surprised by the warning, and particularly by the call out of lower than anticipated Enterprise demand."

"Juniper's miss confirms our thesis that the Router category is under pressure, but we take nothing else new from the Service Provider-related commentary."

Needham – Hold

While we see Juniper as one of the weaker companies in our coverage, there could be read-throughs to other names such as Cisco, F5 Networks and Viavi. We think Arista and Gigamon are likely to be able to power through the choppy environment.

"1Q miss makes 2Q Street look untenable. In order to hit the Street estimate for the second quarter, Juniper would need to post 25% Q-Q growth into CY2Q, which seems highly improbable."

Raymond James – Market Perform

"We considered the original forecast conservative, so despite worries about a slow spending environment, we thought Juniper had set a low bar. With this tough start to the year, delivering annual growth may be a challenge."

Oppenheimer – Perform

"Juniper faces increasing competition and strategic isolation. In service provider routing, Juniper faces challenging competition from NOK/ALU and CSCO/ERIC (partnership). In switching, Juniper faces pressure in campus as the RKUS acquisition leaves it without a strong WLAN partner and in DC it is pressured by CSCO, ANET, and white box. Meanwhile, security remains a work in progress."

"Overall the expected miss validates our negative view and our belief that Juniper faces growing headwinds across both routing and switching. While we thought Juniper could post a solid 2016 before headwinds weighed on results, the poor 1Q16 results suggest challenges have hit earlier than we expected."

Juniper Q1 Warning

In a press release, Juniper said it now sees first quarter non-GAAP EPS of $0.35 to $0.37, down from prior guidance of $0.42 to $0.46.

The company also trimmed its first quarter revenue forecast to a range of $1.090 billion to $1.100 billion from previous guidance of $1.150 billion to $1.190 billion, due to weaker than anticipated demand from Enterprise and timing of deployments of certain U.S. and EMEA Tier 1 Telecoms.

Wall Street analysts, on average, were expecting earnings of $0.44 on revenue of $1.18 billion.

"Although we expect results to be lower than our initial guidance for the first quarter, we remain constructive on fiscal 2016 and expect growth from new products to contribute to our topline, coupled with our ongoing focus on cost discipline to drive non-GAAP operating margin expansion for the full year," Rami Rahim, chief executive officer of Juniper Networks, said in a statement.

The Sunnyvale, California-based Juniper is set to release full first quarter results after the close on April 28.

The news dragged down networking stocks over concerns that an enterprise slowdown may also hurt others in the sector:

Cisco Systems, Inc. (NASDAQ: CSCO), down 0.11 percent to $27.59

F5 Networks, Inc. (NASDAQ: FFIV), down 2.35 percent to $94.99

Palo Alto Networks Inc (NYSE: PANW), down 0.41 percent to $139.86

Fortinet Inc (NASDAQ: FTNT), down 3.87 percent to $28.78

Ciena Corporation (NYSE: CIEN), down 2.57 percent to $17.44

Brocade Communications Systems, Inc. (NASDAQ: BRCD), down 2.37 percent to $9.48

Arista Networks Inc (NYSE: ANET), down 2.39 percent to $62.00

Celestica Inc (NYSE: CLS), down 2.75 percent to $10.60

Shares of Juniper were down about 7 percent near the end of Tuesday's session.

Latest Ratings for ANET

Sep 2016MKM PartnersDowngradesBuyNeutral
Sep 2016Deutsche BankMaintainsBuy
Aug 2016CitigroupMaintainsNeutral

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