Justin is an active trader with more than 20-years of industry experience. He has worked at big banks and hedge funds including Citigroup, D. E. Shaw and Millennium Capital Management.
When a technology company is embedded in the infrastructure that supports our daily lives, it rarely assumes the status given to a household name. Juniper Networks (JNPR) has been an incredible success story over the past 25 years, yet how many people on the street would recognize it as so? Investors, however, are well aware that this firm singlehandedly took on Cisco in a ‘David versus Goliath’ brawl back in the early 2000s and has yet to succumb or look back for a minute. Its daily price chart in 2021 could be used to define an active trend, and, as always, let the trend be your friend. JNPR currently trades at $27.41. Its market cap is $9bn.
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Juniper Networks has already had its Q2 earnings call, beating Street expectations once again, as it has three out of the last four quarters. The trend in the above chart is a marvel to observe, as higher highs and higher lows have marched in lockstep precision since last December on the chart. It would be easy to get enamored with this chart depiction, but analysts are beginning to get wary of its recent ranging behavior. Has JNPR reached a peak, or is it mainly a temporary lull as investors catch their breath?
Juniper Networks is a networking technology company, and, as such, is deep into routing products and the cloud. It is a global company with nearly 10,000 employees and has focused on every component of the network value chain from simple management and issue detection to support and security issues. If you are a private company, a governmental unit, or an internet service provider, then you are most likely a customer of this firm or need to be.
What is the Juniper Networks stock forecast, and is it a good buy at this time? Management contends that the future is bright, but analysts know that any technology company cannot stay on top forever. The networking industry is nearly a commodity, which means that margins are tight and competition is tough. One entity is only as good as its last press release, so to speak. JNPR has been riding a wave of late, but analysts are now suggesting a ‘Hold’, which is not dramatic, but the flattening of the trend curve is evidence that a pause is in order.
In 1995, Pradeep Sindhu, a former scientist with Xerox’s Palo Alto Research Center, was spending an enjoyable vacation, when suddenly he had an idea about the burgeoning internet network and the need for more speed and efficiency in how the data was managed and distributed. Packet switching technology was not a novel idea at the time, having had its roots in the 1960s, but the early internet still employed routers that basically handled telephone calls by assigning channels to each individual caller.
Sindhu immediately envisioned a network that would share packets of information, thereby optimizing the use of channels by allowing them to be shared by separate data transmissions. His idea of a modern router would leapfrog the competition and produce speeds beyond what was possible with existing technology. His new firm was founded in 1996 with $2m of seed money. He recruited Scott Kriens to be his chief executive officer, while he assumed the role of chief technology officer. Kriens is credited with the early market successes of Juniper Networks.
Within the next three years, another $40m in capital would flow into the company coffers, its last round including heavy support from the likes of Siemens, Ericsson, Nortel, Qwest, and 3Com. The firm was obviously filling a major need in the marketplace with its innovative routers, its primary focus in its pre-IPO days. In 1998, the firm recorded $3.8m in revenue. By 1999, 50 telecommunications companies were using its products.
With great fanfare, Juniper Networks went public on the Nasdaq in April 1999, setting a record for the technology sector in the process with the level of trading attention that it drew. Prices nearly tripled on that fateful day, establishing a market cap for the company of $4.9bn. Revenues then exploded, skyrocketing to $678m in 2000. Share prices soon quintupled. By 2004, the firm had cornered 38% of the core router market and had crossed the $1bn mark in revenue. As industry rags quickly noted, Juniper Networks had become the “darling of Wall Street investors” and for good reason.
For many of those early halcyon years, the press was filled with daily updates for the Juniper Networks and Cisco battles in the marketplace, trying to one-up one another. Juniper Networks paved the way for optical internet service in China, but soon recoiled when the dot-com bubble burst. All technology companies took a hit. Juniper Networks had to lay off 10% of its workforce, after losing nearly two-thirds of its revenues. It soon recovered, however, in 2004 and doubled its revenue base to $2bn in the year that followed.
Since those early days, Juniper Networks has expanded and contracted on a few occasions, and after Kriens’ leadership at the helm, only three CEOs have followed. When Kriens became chairman in 2008, he brought in Kevin Johnson from Microsoft. Before Johnson’s arrival, the firm had concentrated on hardware solutions as the prudent passageway for more speed, but it needed to focus on software for its future. Johnson quickly established a software team to address the gap.
All of the fireworks surrounding Juniper Networks now appear to have been fired during its first 15 years in the market. For the past decade, share prices have been basically flat, occasionally climbing toward $35 and also occasionally dipping below $20. It is still a formidable competitor in what has evolved into a commodity-type business model. 2021 has witnessed a strong but gradual upward trend – nothing as dramatic as in its early years, but steady as it goes. Is Juniper Networks stock a good buy or sell at this point? Analysts like this company. There is potential.
At this point in time in late July, Juniper Networks is one of several companies that have already released their earnings report for Q2. According to Zacks Equity Research: “Juniper Networks, Inc. (JNPR ) reported healthy second-quarter 2021 results, wherein both the bottom line and the top line beat the Zacks Consensus Estimate. Investments in customer solutions and sales organization have enabled the company to capitalize on improving end-market conditions.”
More good data from a quality company seemed to be the news. How did the market react? It actually gapped down before the earnings call. Management revised guidance that chip supply constraints might impede growth. Yes, there was a shortage of chips in the semiconductor arena, which would cause shipment delays and raise costs, but the company is used to dealing with issues of this nature and will be resilient. After the opening gap, share prices rose and finally filled the gap on the subsequent day, but price stagnated at its prevailing level since mid-June.
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What is the problem, and how will JNPR shares play out over the next three months? After reviewing the short-term daily chart above, the word ‘tapering’ comes to mind. The market does not want ‘steady as you go’, and the technicals are screaming this sentiment at the moment. The momentum of this year’s stable upward trend is diminishing. The tale is told by simple moving averages. The 50-day line has caught up with the 20-day average, which had switched from support to resistance in June. It soon tested 50-day support, eventually bouncing off the 100-day Green line on not one but two occasions. Price now sits at the juncture of short-term averages.
The Bollinger Bands have also contracted in line with the share prices’ ranging behavior. The RSI and MACD indicators are inconclusive, waiting for something to happen, but earnings have already been reported. Why is there a stall in progress? The issues may be outside of the firm’s ability to control. Concerns are rising related to the COVID-19 pandemic’s Delta strain and the slowdown in chip production.
The company released a long earnings statement, which made mention of the ensuing third quarter: “We expect our Q3’21 non-GAAP gross margin to decline sequentially due to higher costs related to supply constraints and an expected increase in service delivery costs, partially offset by benefits from higher revenue. We expect a modest sequential increase in Non-GAAP operating margin.” Investors are not too pleased with this one comment, but again, the price gap closed.
Juniper Networks has outperformed the market for the first half of 2021, but will it do so for the second half? This question is, what is holding back investor support? JNPR is a solid ‘Hold’ at the moment, due more than likely to a general assessment of the wireless market. Based on the guidance already disclosed and revisions made to future forecasts, analysts perceive that Juniper Networks is trapped in a market that can only underperform in the near term. JNPR’s share price intransigence is tied to this external assessment. Investors want to see their ‘darling’ forging ahead at a rapid pace.
What is the Juniper Networks stock forecast 12 months out? Once again, the current price behavior of JNPR shares is telegraphing uncertainty for the near and short term. CNN has polled 18 analysts for their predictions as of July 2022, and the median has come out at an even $27, 1.60% below today’s closing price of $27.41. On the high end, the guesstimate is $34, a good 24% above today’s close. The low end, however, is emblematic of the current uneasiness about what the general market might bring. Analysts foresee a low of $19, a decline of nearly 31% from today’s price point.
It is a good thing that Juniper Networks outperformed expectations this time around. If it had only met them, its share price might have been pounded heavily. Competitors in this arena should take note, if their reports are still to be made. Analysts, however, are not abandoning this stock. CNN conducted another poll of 20 investment analysts as to how their recommendations may have recently changed. The five analysts in the Sell or Under-perform area remained as they were. Nine analysts have sustained their ‘Hold’ ratings, while one of these shifted to Out-perform. Four brave folks remained steadfastly in the ‘Buy’ category. No one is running away, but no one is cheering.
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From a long-term perspective, the weekly price chart depicted above would seem to suggest that Juniper Networks has been on a long downward spiral, exacerbated by COVID-19 at first look, with a bump upward due to increased network activity from a conversion to virtual workplaces. When analysts who specialize in long-term projections use their AI algorithms to model the future, Juniper Networks’ prior pricing history sets the stage for doom and gloom five years out.
While this exercise results in values in the $20 range, we have to look elsewhere to determine if other extenuating circumstances could bolster the firm’s prospects. Juniper Networks’ CEO Rami Rahim recently touted the firm’s positioning for the future in this statement: “Our experience-first strategy is working, our teams are executing well and the investments we have made in our customer solutions and our sales organization are enabling us to capitalize on improving market-end conditions.”
Holger Mueller, an analyst with Constellation Research Inc., commends management for staving off chip supply challenges due to increased network demand from so many people having to work from home because of COVID-19. According to him, this offset might wane: “Juniper may feel the squeeze between supply chain costs rising and price-aware products. The key challenge for its management is to protect profit margins and keep them at the 10% mark where they are now.”
Commodity industries require scale to prosper when the going gets tough. Juniper Networks is still a mid-cap company with its $9bn market cap. For example, it’s competing with Cisco, whose market cap is $232bn, and with Arista, a new competitor in the space valued at $29bn – there seems to be no contest before the battle has even begun. However, Juniper Networks’ P/E ratio is higher than the industry average and its competitors. Does that count for something? A few analysts point to this ratio as a reason why the stock is presently overpriced, but others claim it as evidence that share prices will appreciate.
Is Juniper Networks’ stock forecast for 2025 going to surprise investors? Due to its mid-cap status, the possibility of a merger or buyout will always be on the cards, prompting a premium over today’s price if the fundamentals are worth it for an acquirer. For the last five years, this stock has been range bound below $35. There are many variables at play, but there will need to be a few positive surprises along that path, possibly a 5G rollout to beat the band, if JNPR is to soar.
Juniper Networks may be the network infrastructure company that few people have heard of, but it has crafted an excellent reputation in the networking industry over the past 25 years. Near to mid-term prospects look favorable for the company, if you agree with half of the investment analysts who cover this stock. There are two camps at present. The negative side is concerned that a correction is long overdue and that COVID-19 impacts will persist, not diminish.
Analysts in the positive camp, however, predict that Juniper Networks’ EPS will grow at a clip of 32% per annum for the next three years, a reason perhaps for its sky-high P/E ratio of 45. To these analysts, this ratio is a true gauge of investor sentiment and the market’s take on future expectations. If you believe that you pay for what you get, then Juniper Networks may have the potential for upward mobility in the years to come.
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