Deutsche Bank: Buy The Dip In Juniper Networks

The market reacted negatively to Juniper Networks, Inc. JNPR's preliminary second-quarter earnings announcement last week, and Deutsche Bank is recommending investors take advantage of what it termed a "reasonable entry point" for the stock.

The Analyst

Deutsche Bank's Vijay Bhagavath upgraded Juniper Networks from Hold to Buy with a price target lifted from $25 to $32.

The Thesis

Juniper Networks reported Friday with a "better than feared" earnings update, but third quarter guidance fell short of what the Street was expecting, Bhagavath said in the upgrade note. (See the analyst's track record here.) 

The sell-off pushed the stock to an attractive valuation of 12 times P/E and nine times EV to FCF, which should be taken advantage of by investors ahead of three major product cycle catalysts, the analyst said: 

• Expectations for a 2019 commercial rollout of 5G broadband implies a $20-billion market opportunity for JuniperBhagavath said. Encouragingly, the company won't be directly competing with rival Cisco Systems, Inc. CSCO, as the opportunity is large enough for both companies to capture "their fair share." 
• The upcoming 400G Switch Router refresh is "incremental" to the company's fundamentals in the bottom half of 2019 and beyond and represents a $2-billion or more market opportunity, the analyst said. Juniper presently has a "subscale footprint" in Leaf, Spine and Core Switching and Routing and Hyperscale Clouds, according to Deutsche Bank. 
• The Multi Cloud Switch Router Refresh cycle represents a more than $14-billion market opportunity, and Juniper Networks has shown momentum in the business line, Bhagavath said. The Q2 report showed 20-percent growth from the first quarter in the Enterprise segment.

Price Action

Juniper shares were trading up 0.8 percent to $26.39 at the time of publication Monday. 

Related Links:

Benzinga's Top Upgrades, Downgrades For July 30, 2018

Juniper's Cloud 'Stall' Prompts BMO Downgrade

Photo courtesy of Juniper Networks.