Juniper Networks Powered By Several Growth Drivers, Nomura Instinet Says In Upgrade

Juniper Networks, Inc. JNPR should benefit from increased webscale spending and data center market share, Nomura Instinet said in a Wednesday rating upgrade. 

The Analyst

Nomura Instinet analyst Jeffrey Kvaal upgraded Juniper Networks from Neutral to Buy and and increased the price target from $28 to $34.

The Thesis

Webscale capex is expected to rise 40 percent in 2018 and a conservative 16 percent in 2019, Kvaal said in the upgrade note. (See his track record here.) 

While Juniper Networks has reported declining webscale revenue in 2018, Kvaal does not believe the routing share has slipped.

“As the MX to PTX migration is 80-percent complete, ongoing robust port growth should restore webscale routing growth in 2018,” the analyst said. 

This healthy routing business should build a strong foundation for the company’s reset switching platform, Kvaal said.

“Juniper has resolved the barriers that have prevented share gains in data center switching from prior refreshes (QFabric in 2010, QFX10000 in 2016). Juniper’s new QFX switches have the speed (400G), design topology, and software support to compete on at least an even footing with rivals Arista Networks Inc ANET and Cisco Systems, Inc. CSCO.”

Enterprise growth should remain strong, Kvaal said. Instinet raised its sales growth estimates for Juniper from 3 percent to 5 percent.

The service provider segment remains a risk, the analyst said. 

“We consider declining routing spending a multiyear theme as telcos instead fund optical and mobile capex. Share loss is likely as telcos centralize their routing functions, though SRX and MX line card refreshes may be an offset in 2019. We model ongoing 5-percent declines in SP.”

Price Action

Juniper Networks shares were up 2.27 percent at $29.25 at the time of publication Wednesday. 

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