Juniper Networks Climbs: Has Telecom Bottomed?

Is Juniper Networks (JNPR) calling the bottom for telecom and computer networking equipment?

A few people think so this morning, the day after Juniper announced that revenue for March-ending fiscal Q1 will be less than originally expected. Analysts at Brean-Murray this morning initiated coverage of Juniper with a “Buy” rating and a price target of $20, saying that risks to the telecom market are now well understood and that the long term potential for Juniper should be the focus of investors. R.W. Baird analyst Tristan Gerra writes in a note to clients this morning that the first quarter could be a bottom for telecom capital expenditures.

And Broadpoint/Amtech analyst Mark McKechnie this morning raised his rating on the stock from “Neutral” to “Buy,” with a $24 price target, writing that Juniper’s earnings per share forecast of 16 cents to 17 cents per share is within the company’s originally forecasted range despite lower-than-expected revenue as the company managed to trim back on operating expenses more than expected. He’s somewhat less certain that the equipment market is at a bottom, writing that, “While we … believe March could mark the bottom, we suspect June and September will likely remain depressed given tight capex markets.” McKechnie sees a spending bump at some point, as carriers try to catch up with growth in Internet traffic. McKechnie’s sales estimate for this year goes from $3.3 billion to $3.1 billion, and EPS from $.75 to $.70. He’s also lowering his FY’10 estimate by 5 cents, to $1.

Juniper investors are certainly hoping for a bottom today, pushing the stock up $2.00, or 12.8%, to $17.62.

Comments

[Moon Kil Woong:]

I'm scratching my head at this one. Are they relying to call a market bottom or a sectoral one. If they are trying to call a market bottom they are a bit late and are just bandwagoning (not vary daring). If they are calling a sectoral one, the facts just don't justify their claims.

I'd be inclined for you to look to Cisco or others but Cisco is dallying with trying to invade their own customer's market since they are running out of enough competitors to gobble up to put their capital to use and expand (as well as make up for their own R&D deficiencies).

So you maybe instead should ask, is Juniper delicious enough for Cisco? It certainly has enough cash.

I don't own Juniper or Cisco. I'm just sort of slamming the analysts here for a market moving but unjustified argument.

Apr 09 10:45 AM