Last week, Juniper Networks, Inc. (JNPR) delivered mixed Q3 2021 results, with a fifth consecutive quarter of yearly growth in its top-line. Shares of the networking products and services provider have gained 55.3% over the past 12 months.
Let’s take a look at Juniper’s third-quarter performance, as well as changes in its key risk factors that investors should know about.
Driven by growth in Cloud and Enterprise verticals, revenue increased 4.4% year-over-year to $1.19 billion, yet missed Street estimates by $14.2 million.
Meanwhile, the company’s operating margin decreased to 16.6% from 17.1% a year ago. Earnings per share (EPS), at $0.46, fell in line with estimates. Juniper earned $0.43 per share in the same quarter last year.
CEO of Juniper, Rami Rahim, remarked, “Our strategy is working and the investments we have made both in our customer solutions and our sales organization are enabling us to capitalize on the strong demand across each of our end markets.”
He further added, “Based on the momentum we are seeing, I am confident in our ability to not only grow our business in the December quarter, but also to do so again during the upcoming year.” (See Insiders’ Hot Stocks on TipRanks)
Looking ahead, Juniper expects to earn revenue to the tune of $1.26 billion in Q4, plus or minus $50 million. Similarly, EPS is expected to be around $0.53 per share, plus or minus $0.05.
The present business environment, amid the COVID-19 pandemic, has seen a global shortage of semiconductors. Juniper has experienced component shortages, extending lead times and raising costs for some products. According to the company, these factors will persist, at least for the next few quarters.
Consequently, Juniper expects gross margin to range between 58% and 60% for the fourth quarter. Meanwhile, under normal circumstances, the company had expected a gross margin of 61% .
On October 27, Needham analyst Alex Henderson reiterated a Buy rating on the stock, with a price target of $30.
Reacting to the Q3 showing, Henderson highlighted the more than 50% year-over-year growth in orders registered by Juniper, and added that the order momentum was strong across all of its verticals, customer solutions, and geographies.
Consensus on the Street is a Moderate Buy based on 2 Buys and 3 Holds. The average Juniper Networks price target of $31 implies the stock is fairly priced at current levels.
Changes in Risk Factor Profile
According to the new TipRanks Risk Factors tool, Juniper’s top risk category is Finance & Corporate, accounting for 35% of the total 34 risks identified. In the recent Q3 report, the company added two key risk factors under the Finance & Corporate risk category.
All London Inter-Bank Offered Rate (LIBOR) tenors, which are relevant to Juniper, will not be representative after June 30, 2023. Consequently, borrowings that extend beyond this timeline would be converted to a replacement rate.
It is possible that the replacement rates may result in higher interest costs for Juniper, and the exact magnitude of the end of LIBOR on the company’s borrowing costs cannot be predicted at present.
Additionally, Juniper noted that its strategy to expand its software business could negatively affect its competitive position due to several factors.
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