Juniper Looks at Least 20% Overvalued

Juniper (JNPR) is a company that has amazed us with their ability to execute in a hyper-competitive market.

However lately there are bits of data coming in that suggest they are facing some fresh headwinds. While they appear okay on the enterprise front, the carrier business could be more punk. Cisco (CSCO) continues to execute very well in the carrier area and 2nd tier vendors like Nortel (NT) are even winning some business in place of JNPR.

The other major concern we have on JNPR is high valuation. At 5x sales and 30x earnings, we find the stock at least 20% overvalued as we go into a period of what we expect to be somewhat soft conditions.

We prefer other names like Corning (GLW) on the networking side and Research in Motion (RIMM) on Mobile Internet.

Disclosure: R2Capital is short shares of JNPR and long shares of GLW and RIMM.

Comments

[Ranjit Thomas:]

Follow the cash, my friend. Have a look at their cash flow statement and see the amount of cash they throw up - substantially more than their net income.

2008 Jun 12 08:27 AM

[borisb:]

Considering the stock has traded down 9 months from $38s to the $22s, there has been a major washout, and the short money has already been made. The company beat estimates for the first quarter 2008 in late April, making a chart reversal due anytime.

2008 Jun 19 10:09 PM