Juniper Is A Goldman Sachs Conviction Buy On Switching Momentum

Juniper Networks, Inc. (NYSE: JNPR)'s Switching product could drive a re-acceleration in the company’s top- and bottom-line growth into 2017, and lend “meaningful upside to estimates,” Goldman Sachs’ Simona Jankowski said in a report. She maintains a Buy rating on the company, while adding the stock to its Conviction List.

Analyst Jankowski mentioned that the 12-month price target of $31 reflected 19 percent upside, which is likely to result from upside to EPS estimates as well as multiple expansion.

Product Cycle

The main upside to Juniper is likely to be driven by Switching, which represents 17 percent of the company’s sales estimate for 2016. Jankowski noted that the Goldman Sachs estimate for Switching was currently almost $100 million, or 10 percent, higher than the consensus expectations.

“Juniper’s new switching products expand its TAM in the high growth data center switching segment, where it can gain share from Cisco Systems, Inc. (NASDAQ: CSCO) and compete with Arista Networks Inc (NYSE: ANET). Juniper has already seen good traction (QFX up 50 percent yoy in 3Q). With the last QFX product out in 4Q we expect switching growth to accelerate,” the analyst wrote.

Juniper’s deferred product revenue growth has accelerated significantly from 24 percent year-over-year in the past two quarters to 42 percent in the current quarter. “Our analysis shows product deferred is a leading indicator to sales, implying meaningful upside to the next 2 quarters,” Jankowski stated.

Juniper recently reported upbeat Q3 results and raised its guidance for Q4.

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