“Our thesis is that new products should stabilize its share in the carrier router market and expand the addressable opportunity in the enterprise market,” he wrote in a research note:
We note that our upgrade is based on expected operating improvement in 2008 so our call could be too early. That said, we see limited downside risk to shares at current levels, and with most of the bad news priced in, we recommend that investors accumulate positions.
Coleman detailed several factors contributing to his new upbeat stance:
He sees an improving wireline carrier spending environment in 2007, particularly in the U.S. and Japan, key markets for Juniper. He expects stabilization of the carrier edge router business over the next 1-2 quarters as new products gain marketplace traction. A high-density Ethernet switch launch within the next 12 months that expands the addressable opportunity in the enterprise, along with a refreshed operating system, should add cohesion to the enterprise go-to-market strategy. Share buybacks ($2 billion authorized and remaining) should serve as a near-term catalyst.
Coleman raised his 2008 revenue estimate to $3.26 billion from $3 billion; his EPS estimate goes to $1.04 from 93 cents.
Juniper yesterday was up 70 cents at $18.67.
JNPR 1-yr chart