According to Goldman Sachs, investors should look past short-term challenges to appreciate Juniper Networks’ enterprise business.
With a buy recommendation, analyst Michael Ng started covering the shares of network hardware. Ng set a price objective of $39, representing a potential gain of 24.5% over the stock’s Monday closing price.
According to him, the stock will face short-term difficulties due to budgetary scrutiny and difficult-to-replicate comparable times. The question of whether future growth will result from adding new subscribers or from the business clearing its backlog, which accumulated as a result of supply chain and logistical issues that increased lead times, is also a hot topic of discussion. The company’s backlog for 2022 was bigger than it was before the pandemic at more over $2 billion.
Yet when the supply chain stabilizes and the pace of new orders slows, the backlog for 2023 should decrease. Ng claimed that despite the possibility of revenue loss brought on by backlog churn and the slowdown in new orders, the company will gain from concentrating on its enterprise sector.
According to Ng, enduring trends in 400G usage, hybrid multi-cloud, and software-based network management tools will be advantageous for data centers that are prepared for the cloud. According to him, Juniper’s recent initiatives to boost enterprise sales and strengthen ties with channel partners should also benefit the business.
In a note to clients, he stated, “We expect core underlying demand for JNPR products to be supported by secular trends (e.g., 400G, metro, software-based management platforms) and a refocused enterprise strategy, though we recognize that tough comps & macro-driven budget scrutiny will be headwinds in the near term.
The company has concentrated on developing an automated product to take advantage of an expanded business opportunity in urban areas, despite potential difficulties related to reduced enterprise IT spend and cloud expenditure budgets. To support its metro routing business, Juniper is also anticipated to invest in a certain class of service router.
Additionally, he claimed that the business had a big possibility in the field of artificial intelligence. Mist AI was purchased by Jumpier in 2019.
According to him, this is beneficial as the corporation seeks to develop its enterprise division into its own distinctive offering rather than merely serving as a substitute for rivals. In order to do this, Juniper invested in its go-to-market team and added wireless and software management capabilities to its enterprise campus portfolio.
Ng claims that enterprise was the fastest-growing business segment in 2022 and that it will continue to be so in the future.
In early premarket trading, Juniper shares increased 1.5%. The stock has underperformed the market as a whole in 2023, falling over 2% while the S&P 500 has gained 5.4%.
Source (CNBC)
