BofA Says It's Time To Connect With Juniper Networks, Projects Multiple Positive Catalysts

Juniper Networks, Inc. JNPR reported preliminary first-quarter results Tuesday that mark an end to the company's "low point" and signal that multiple catalysts are ahead, according to Bank of America Merrill Lynch. 

The Analyst

Bank of America's Tal Liani upgraded Juniper Networks from Neutral to Buy with a price target lifted from $28.50 to $30.

The Thesis

At first glance, Juniper Networks' preliminary earnings report was "weak," as product revenues fell 14.2 percent from one year ago and its operating margin fell from 21 percent to 12 percent, Liani said in a Wednesday note. (See the analyst's track record here.) 

At the same time, the majority of the dilutive impact from the MX to PTX transition has already occurred; cloud routing rose on a quarter-over-quarter basis; and 80 percent of the total bandwidth shipped in the first quarter, which marks an uptick from 40 percent one year ago, the analyst said. 

Multiple catalysts support a bullish stance on the stock, Liani said. Several cloud projects that were put on hold are now moving forward, and deployments should ramp throughout the remainder of 2018 and into 2019, the analyst said.

Juniper's position with carriers "remains solid," and it should be a beneficiary of service providers ramping into metro areas and the future build-outs of 5G networks.

The networking company's preliminary earnings show that the transition to PTX is nearly complete, according to BofA.

While the routing and security businesses could see pressure, Juniper's new product lines have strong performance advantages that should generate market share gains, Liani said. 

Price Action

Juniper Networks shares were up 0.44 percent at the time of publication Wednesday. 

Related Links:

Goldman Sachs' Lack Of Confidence In Juniper Network's Routing Business Leads To Downgrade

3 Reasons This Analyst Is Positive On Juniper Networks

Photo courtesy of Juniper Networks.