A Closer Look At Our $26 Price Estimate For Juniper

by Trefis Team
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Juniper
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Our valuation methodology suggests that Juniper Networks (NYSE:JNPR) stock is worth $26, which is nearly 10% higher than the current market price. Our price estimate is based on a P/E multiple of around 13, slightly lower than the levels at which the stock has traded in recent years. Juniper’s core revenues have declined in recent years, while product gross margins have also compressed. Network Switches was the only product revenue stream with positive growth through the year. However, in Q4 Network Switches revenues also fell 7% on a y-o-y basis. As a result, we forecast the company’s net revenues and net margin for 2018 to be slightly lower than prior year levels.

For 2018, we expect Juniper’s revenues to decline nearly 3% to under $4.9 billion, while the net margin is expected to be around 150 basis points lower at 14.5%. We have summarized our expectations on our interactive dashboard platform. If you disagree with our forecasts, you can change the key drivers including revenue growth by segment and net margins for Juniper to gauge how changes will impact its valuation.

Competition Pressuring Product Sales

Increasing competition from Cisco and Huawei has been a key factor in causing revenue declines for Juniper’s Product sales in recent years. We forecast Router revenues to be 5% lower this year, at $2.1 billion. Similarly, Network Security revenues are also expected to continue to decline on a year-over-year basis. On the other hand, Juniper saw increased demand for its refreshed Switches product line through the first three quarters of 2017, though Q4 revenues declined by over 7% on a y-o-y basis. As a result, we forecast Juniper’s net revenue to be around 3% lower on a y-o-y basis to $4.9 billion. In addition, falling Product gross margins are likely to impact the company’s profitability.

In order to reward shareholders, Juniper repurchased 26 million shares for about $720 million through 2017, compared to 13.5 million shares for $313 million in 2016. Management further indicated the company’s intent to enter into an accelerated share repurchase program worth $750 million in the first quarter of 2018, while also increasing cash dividends.

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