Why These Juniper Networks Analysts Remain On The Sidelines

Juniper Networks, Inc. JNPR reported preliminary first-quarter results Thursday that fell short of convincing two analysts to turn bullish on the stock. 

The Analyst

Wells Fargo's Aaron Rakers maintains a Market Perform rating on Juniper Network with an unchanged $27 price target.

MKM Partners' Michael Genovese maintains at Neutral, price target lifted from $27 to $30.

Wells Fargo: Focus On 2020

Juniper's story for 2020 and beyond looks "more compelling" given favorable industry trends, Rakers said in a Friday note. 

Those include the MX 5G core router product cycle, the new 400G QFX switches and PTX routers, along with the expansion of software-only contributions, the analyst said. 

Thursday's report showed weakness across most product lines, including cloud revenue, which fell 18 percent year-over-year and fell 6 percent from last quarter to $223 million, he said. 

Other highlights from Juniper's report include the following, Rakers said: 

• Comments from management that the hardest part of the company's go-to-market reorganization is complete.
• Enterprise revenue fell 20 percent from last quarter, although it was up 3 percent year-over-year.
• Juniper said the 100G silicon photonics product won't see shipments in the first half of 2019.
• The software business rose 8 percent from last year and accounted for more than 10 percent of total revenue.

MKM: 'Not Very Excited' About Growth Initiatives

Juniper's first-quarter results were "solid enough," but certain metrics were "not that impressive," including a 4-percent decline in revenue, Genovese said in a Friday note.

Positive takeaways included growth in software revenue, which now accounts for more than 10 percent of total revenue, the analyst said. 

Genovese said he is "not very excited" about Juniper's growth initiatives — especially its 400G switching and routing products.

Juniper's weak performance in the cloud business came at a time when a direct competitor grew its 100G switching and routing business and gained market share, he said. 

MKM does not project that Juniper will gain market share in its 400G cycle, and the company is not expected to see success in commercializing its silicon photonics innovations, Genovese said. 

Juniper's acquisition of Mist does present a "potentially interesting" growth opportunity, as it could help the company correct prior mistakes in its software-defined enterprise space, according to MKM. 

Price Action

Juniper Networks shares were down 3.16 percent at $27.24 at the close Friday. 

Related Links:

Juniper Networks Buys Mist Systems For $405M: 2 Analyst Takes

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Photo by Juniper Networks via Wikimedia.