It’s Time to Get Off the Juniper Networks, Inc. (JNPR) Bandwagon

Page 1 of 2

It seems I’ve lost quite a few friends following my recent article on Juniper Networks, Inc. (NYSE:JNPR) . But I’ve said some things that needed to be said. Specifically, it’s time that investors forget this perceived rivalry with Cisco Systems, Inc. (NASDAQ:CSCO). These are two companies in separate leagues that are now heading in opposite directions.

I will concede that Juniper has some product launches on the horizon that can potentially revive its growth. Then again, we’ve been saying this for quite some time. And I’ve become annoyed that the stock is trading at almost five times the valuation of Cisco. Remarkably, despite dreadful fourth-quarter results, investors are still betting on a revival. But the optimism seems overdone, if not grossly misguided.

While networking/security sector often trades in tandem, investors are mistaken in thinking that the challenges facing one company are the problems of another. This is not often the case. Juniper’s growth story, as well as that of F5 Networks, Inc. (NASDAQ:FFIV) and Riverbed Technology, Inc. (NASDAQ:RVBD) are strongly predicated on the rebound in carrier spending. Consequently, they are always in a holding pattern.

That’s not the scenario with Cisco, which has much stronger exposure in the enterprise, and thus the thesis of my recent comparison to Juniper. While a rebound in carrier spending can help these shares, Juniper still has to answer for its lack of growth as evident by the 2% revenue improvement in its recent quarter.

Plus, there are also uncertainties about threats to Juniper’s long-term margins, not only from current rivals, but now it must outperform Oracle Corporation (NASDAQ:ORCL) after the database giant just picked off Acme Packet, Inc. (NASDAQ:APKT) for $2.1 billion. While it can be argued that this move by Oracle was more of an attempt to shore up its cloud offerings, thanks to Oracle’s existing enterprise footprint the company can now easily undercut Juniper with packaged deals.

What’s more, Oracle does not have to wait on carriers to strengthen revenue. And Oracle’s higher-margin cloud service business can be used to offset any potential weakness in hardware. This is not an advantage that Juniper enjoys today. However, in the recent quarter, Juniper’s service revenue did well by advancing 7% sequentially and 5% year over year.

However, it is still trailing Cisco’s 12% growth. The good news is Juniper is doing well in terms of profitability and cost management. Gross margin grew by two percentage points year over year and beat analysts’ estimates by a full point. Likewise, operating income was solid at 18%. The company was able to exceed its own guidance of 16% while topping consensus estimates by over two points.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!