Juniper Networks (JNPR) can beat slowdown and grow in the long term. Here’s why

The performance of network gear maker Juniper Networks, Inc. (NYSE: JNPR) has been sluggish for quite some time, and things went from bad to worse in the early months of the pandemic. The company is currently investing in ramping up its portfolio, a move that is vital to combat competition from bigger rival Cisco Systems (NASDAQ: CSCO). It is worth noting that Juniper is still one of the top five players in the router and switch market globally.

Stock Falters

Long-term shareholders remain disappointed because the stock is yet to show any sign of meaningful recovery after the 2000 stock split. In that respect, JNPR is an unattractive investment. The question is can the company generate decent shareholder value in the changed market scenario?. While an immediate rebound is unlikely, the company has the potential to emerge stronger once the virus crisis ends, aided by its shift to cloud-oriented offerings.

Read management/analysts’ comments on quarterly earnings

Investors, especially those looking for long-term engagement, would want to keep the stock on their watchlist. Meanwhile, it goes without saying that this is not the right time to sell either. The fast-paced transformation the IT industry is experiencing, especially after the coronavirus outbreak that set off a digitization wave, has created a unique opportunity for the struggling business to regain lost ground.

Being Cloud-ready

The key to Juniper’s much-awaited recovery is its cloud-ready offerings and high-margin software products, which have outshined the legacy services business in the recent past. The company should be able to take advantage of the ongoing cloud migration and network revamp. The improvement in enterprise spending and market reopening will catalyze the recovery.

Adding to the positive momentum, the cyclical demand for Juniper’s products and services has accelerated. Last year, it acquired networking software startup 128 Technology in a $450-million deal, to enhance its AI and edge capabilities in the enterprise segment. But, for those tailwinds to translate into profitability, measures are needed to ease the strain on margins amid high costs and pricing pressure. Also, the deepening chip shortage could weigh on top-line performance in the near team.

Good Start to FY21

In the March quarter, revenues grew 8% annually to $1.1 billion. As a result, adjusted earnings rose to $0.30 per share from $0.23 per share in the same period of 2020. The numbers also came in above experts’ prediction, as they did in the previous quarter.

The success we’re seeing is due in large part to deliberate actions we have taken to both strengthen our portfolio and enhance our go-to-market organization. Our focus on leading the industry is delivering simplified operations and a superior end-user experience, what we call Experience-First Networking, is resonating in the market. And our deliberate focus on specific customer solutions is enabling us to accelerate our success across the areas we serve.

Rami Rahim, chief executive officer of Juniper

JNPR has mostly underperformed the market in recent times, though the stock improved its position since last year. Currently, the shares are trading slightly above their 52-week average price, after gaining 18% this year. At $26.4, the stock traded lower Tuesday afternoon.