Shareholders of Juniper Networks, Inc. (NYSE:JNPR) are having a rough day as the company’s stock is down nearly 8%, after the networking hardware-maker lowered its outlook for the first quarter of 2016 owing to soft demand from enterprises as well as U.S. and European telecom customers.
In reaction, Morgan Stanley analyst James Faucette reiterated an Equal-Weight rating on the stock with a price target of $24, while lowering his Q1 revenue and EPS estimates to $1,098 million and $0.36, from $1,178 million and $0.44, respectively.
Faucette believes that the product cycle longevity is the near term issue. He noted, “We have been cautious on Juniper’s latest product cycleas our checks to date have suggested that Juniper remains a niche networking option outside of routing, seeing little expansion of the customer base or share gains. But more concerning and central to our thesis, we think the company’s decision to cut R&D over the past few years has long lasting implications on future product cycles competing in an industry with heavy investment and no growth in profit pools.”
“We continue to believe that cuts the company has made to opex increase the probability that Juniper will eventually miss a product cycle and/or be compelled to increase acquisition spend (given increasing levels of competitive investment in the space). Despite the interest Juniper is seeing in its latest product refresh, which could be showing signs of waning, we believe the long-term annual earnings power of the company remains ~$2 across the entirety of the product cycle,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst James Faucette has a yearly average return of 9.8% and a 73% success rate. Faucette is ranked #304 out of 3787 analysts.
Out of the 25 analysts polled by TipRanks, 8 rate Juniper Networks stock a Buy, 12 rate the stock a Hold and 1 recommends a Sell. With a return potential of 21%, the stock’s consensus target price stands at $27.76.