15% Upside For Juniper Networks?

-10.29%
Downside
37.06
Market
33.25
Trefis
JNPR: Juniper Networks logo
JNPR
Juniper Networks

Despite more than a 25% rise since the March lows of this year, at the current price of around $22 per share, we believe Juniper Networks stock (NYSE: JNPR) is still a good opportunity for investors. Juniper stock has increased from $17 to $22 off the recent bottom, less than the S&P which increased by almost 60% from its lows. Further, the stock is down around 12% from its 2020 pre-Covid high of $25. We believe that Juniper stock could reach its pre-Covid high, rising almost 15% from its current level, driven by expectations of rising demand and strong Q3 2020 results. Our dashboard Buy Or Sell Juniper Networks Inc. Stock? has the underlying numbers behind our thinking.

The stock price fall since 2017-end came due to a 12% decrease in revenue from $5.03 billion in 2017 to $4.45 billion in 2019. However, net margins jumped by 27% over this period, but this was mainly due to a drop in the effective tax rate (62.3% in 2017 vs 16.7% in 2019). This, combined with a 10% drop in the outstanding share count, led to a 25% rise in EPS, from $0.81 in 2017 to $1.01 in 2019.

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Juniper Networks’ P/E multiple dropped from 35x in 2017 to 24x by 2019 end, but has since dropped further to around 21x. We believe that the company’s P/E ratio has the potential to see an increase in the near term on expectations of continuing demand growth and favorable shareholder return policy, thus driving the stock price higher.

Where Is The Stock Headed?

The global spread of coronavirus and the resulting lockdowns in early 2020 has seen a surge in new online blogs and websites and has also led to a lot of businesses shifting online, which in turn has led to a rise in internet activity. Juniper Networks sells networking products like routers and switches, and also sells network management software, and their business has actually been helped by the pandemic. The company posted Q3 2020 revenue of $1.14 billion, up marginally from $1.13 billion for the same period last year. Further, a drop in operating expenses helped boost EPS, which rose from $0.29 to $0.44 over the same period, and we believe that demand for networking products will stay strong, and Juniper Networks will see strong revenue growth in the near to medium term, causing net income to rise even further.

We expect this to drive up the company’s P/E multiple, and believe that Juniper Networks stock can rise around 15% from current levels, to its pre-Covid high of $25.

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