Stifel Boosts Juniper Networks to Buy On New Product Growth

• Juniper Networks, Inc. JNPR has seen a 24 percent in its share price in the last six months, reaching a high of $28.42 on July 31.
• Stifel’s Christopher Brendler has upgraded the company to Buy, with a price target of $32.
• Juniper Networks’ routers have been showing robust traction with webscale customers and Brendler expects a webscale company to become Juniper Networks’ largest customer over the next 12 months.

Analyst Christopher Brendler mentioned that early checks on new products, such as QFX 10k, have been positive, “showing that Juniper might be starting to gain some traction with spine switches.”

In addition, Stifel’s VAR survey shows positive enterprise momentum, although enterprise customer only account for a third of the company’s total revenues.

Brendler explained that Juniper Networks has traditionally been dependent of tier-1 service providers for routing sales. However, as of 2014, U.S.-based tier-1 service providers have declined to only about 14 percent of the company’s sales.

“On the other hand, webscale companies in 2014 accounted for about 16 percent of sales, growing rapidly,” the Stifel report stated, while adding, “Our checks indicate that over the next 12 months, one of these webscale companies could become larger contributors.”

Among Juniper Networks’ new products, PTX line cards also appear to be gaining momentum with these new line cards driving PTX performance in Q2, and this momentum has continued in Q3.

Brendler expects upside to the sequential growth guidance for the September quarter, with continuing growth in the December quarter. The EPS estimate for 2016 has been raised from $2.06 to $2.12.