Argus Says Investors Celebrating Juniper Networks Based On 'Low-Ball Guidance'

Argus maintained a Hold rating on Juniper Networks, Inc. JNPR in a report issued Monday following the company’s Q4 results.

Analyst Jim Kelleher noted that the company “posted a 14 percent year-over-year revenue decline in 4Q14, as the company’s routing and switching businesses each recorded double-digit declines.”

According to the report, FX was not to blame for the revenue decline as sales had dropped off in North America amid the company working to selloff non-core assets under pressure from activist investor Elliott Management.

“While cost-reduction initiatives are helping offset top-line weakness, they also signal that the company is not modeling imminent recovery in global carrier spending. First-quarter revenue guidance implies an 11 percent annual sales decline at the midpoint. Even factoring in currency and divested operations, 1Q15 guidance suggests that end-market challenges remains significant,” according to Kelleher.

Investors who have celebrated the company’s outperformance versus consensus appear to have done so based on “low-ball guidance from management,” in Kelleher’s view.

The analyst concluded that an indication of “re-acceleration” is needed before getting more aggressive on the stock.

Juniper Networks closed Monday at $22.56, down 0.75 percent.