Juniper Shares Slammed Following Q4 Results; Deutsche Bank Reiterates Sell

The weak first-quarter outlook from Juniper Networks, Inc. JNPR, despite better-than-expected results for the fourth quarter, reinforced the bearish thesis of Deutsche Bank and triggered a selloff in the shares.

The first quarter guide of revenue/EPS of $1.20 billion (+/- $30 million)/$0.38–$0.44 missed consensus view on EPS of $1.19 billion /$0.46, suggesting margin headwinds from pricing pressures in routing and switching business.

Rating Justification

“[O]ur Underweight Thesis argues for meaningful price competition from 100G Jericho Silicon Switch-Routers from Arista Networks Inc ANET, Cisco Systems, Inc. CSCOin 2H17+. We see downward revisions to current elevated consensus earnings estimates for FY17/18,” analyst Vijay Bhagavath wrote in a note.

Juniper noted weakness in cable and in EMEA, offset partially by strength in Switching and Routing sales into U.S. clouds. Bhagavath predicts 0 percent product revenue growth and 13 percent product service revenue for FY 2017.

In addition, the analyst sees limited EPS accretion from Juniper’s operating metrics given gross margins pressures.

“[W]e recommend clients take profit on JNPR at current ~13x P/E levels,” Bhagavath added.

The analyst reiterated his Sell rating and cut the price target by $1 to $20.

At last check, shares of Juniper were seen down 4.87 percent to $26.37.