We are initiating coverage of Juniper Networks Inc. (JNPR) with a Neutral rating and a price target of $30.00. We believe that the company is fairly valued, having witnessed steady growth through acquisitions, as well as the roll out of new services. This has also enabled Juniper to generate solid cash flows.
The company reported decent first quarter results, with revenue of $912.6 million, up 19.0% compared to the year-ago quarter. The company generated 79.0% of its quarterly revenue from product sales, with the remaining 21.0% coming from service revenues. The growth in revenue may be attributed to good market positioning of its products.
This apart, the company witnessed stronger demand in the quarter and generated record levels of deferred revenue and orders, resulting in a high book-to-bill ratio. The company’s first quarter EPS of 27 cents exceeded the Zacks Consensus Estimate of 21 cents.
Juniper is a leading provider of networking solutions and communications market devices. The company develops, designs and sells products that provide network infrastructure used for services and applications based on a single Internet protocol network worldwide. The company caters to the networking needs of enterprises, public sector organizations and service providers across the globe.
The company offers a broad range of products, which may be grouped under three segments:
Infrastructure Products – these products cater to the central and peripheral needs of network infrastructure, along with the wireless access system.
SLT Products – this category mainly includes integrated firewalls, service gateways and VPN (Virtual Private Network) solutions, which consist of integrated firewall, private network, as well as enhanced service protection capabilities in both the enterprise and service provider networks.
Junos Platform – This is a bundle of software including two sub-categories, the Junos space network and the Junos Pulse integrated multi service network clients. This software is used in the application space, to control delivery. It also helps developers.
As per the recent findings by research firm Dell’Oro Group, the top three players of the networking business witnessed a 20.0% sequential increase in revenue during the fourth quarter. The firm also expects that the market will continue to grow through 2010, driven by increased demand for 10G Ethernet products and the integration of data centers. We believe that due to Juniper’s expertise in Ethernet products, it will be able to grab a major share of this additional demand.
With companies substantially increasing their IT spending budgets, the demand for networking products will continue to grow through the rest of 2010. While growth looks imminent, stiff competition from other big players, such as Cisco Systems (CSCO) and Hewlett-Packard Company (HPQ) may pose some challenges.
Read the full analyst report on “JNPR”
Read the full analyst report on “HPQ”
Read the full analyst report on “CSCO”
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