How Sensitive Is Juniper’s Stock To Changes In Its Router Market Share?

Networking giant Juniper (NYSE:JNPR) is one of the largest router players in the industry, with a 15% share in the global router market. However, its share is dwarfed by main rival Cisco (NASDAQ:CSCO) which has a share of over 50%. It is interesting to note that despite the fact that Cisco still commands a massive share in the market, its share has gone down from 62% at the beginning of the decade to just over 50% currently. Comparatively, second-largest player Juniper has improved its share over the same timeframe. Needless to say, Juniper’s ability to maintain or grow its share in the market is important for its valuation. We have created an interactive model that details how a change in its router market share can impact the company’s value. You can modify assumptions such as projected revenues to see how the market share or estimated valuation changes. The image below shows one of the key steps in identifying Juniper’s stock sensitivity to change in its market share. We detail how change in share impacts revenue, which then impacts EPS and subsequently the valuation (assuming the P/E multiple doesn’t change).

We find that a 1% increase in Juniper’s market share would imply a nearly 2.4% upside to its near-term valuation, which we estimate using projected EPS and a forward P/E multiple. Our sensitivity analysis assumes that the increase in market share would not impact Juniper’s forward P/E multiple, which currently stands at just over 12 based on Trefis estimates (P/E based on Non-GAAP EPS). However, if you disagree with that assumption, you can make changes to all input variables on the interactive dashboards platform to gauge the impact of all changes on our price estimate and EPS.

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