Juniper Networks, Inc. (JNPR) provides network products and services across the globe. Its solutions help in the transition to a secure and automated multicloud environment. Last week, Juniper came out with better-than-estimated Q2 results.
Let’s take a look at the company’s financial performance and what has changed in its key risk factors that investors should know.
On the back of growth across Cloud, Service Provider and Enterprise verticals, and across geographies, Juniper’s Q2 revenue increased 8% year-over-year to $1.17 billion, beating analysts’ estimate of $1.14 billion.
The CEO of Juniper, Rami Rahim, said, “We reported better-than-expected results, a second consecutive quarter of double-digit product revenue growth and record product orders during the June quarter…We are entering the second half with strong momentum, and I am increasingly confident in our long-term growth prospects.”
Earnings per share stood at $0.43, beating the Street’s estimate of $0.39. (See Juniper Networks stock chart on TipRanks)
In the current scenario of global semiconductor shortage, Juniper highlights that it is experiencing a shortage of such components, which has elevated costs and caused extended lead times for certain products. It expects these constraints to persist for at least the next few quarters. In this scenario, Juniper expects Q3 revenue of $1.2 billion, plus or minus $50 million, and earnings per share of $0.46, plus or minus $0.05.
Additionally, Juniper has also declared a cash dividend of $0.20 per share to be paid on September 22 to investors of record as of September 1.
On July 28, Needham analyst Alex Henderson assigned a Buy rating to the stock with a price target of $30 (3.3% upside potential).
Henderson said, “Juniper’s product and the end-market mix is transitioning from Service Provider to Cloud and enterprise and from large systems to more software and subscription. Juniper’s $550 million Software business is expected to more than double over the next three years. It’s driving share gains in switching, Security, and Routing. We think the guidance Juniper offered and the street is now conforming to offers numerous opportunities for upside to growth and profitability expectations.”
Based on 4 Buys and 1 Hold, consensus on the Street is a Strong Buy. The average Juniper Networks price target of $30.80 implies 6% upside potential. Shares are up 28.5% so far this year.
Now, let’s look at what has changed in the company’s key risk factors.
According to the new Tipranks’ Risk Factors tool, Juniper’s main risk category is Finance & Corporate, which accounts for 35% of the total 34 risks identified. Since June, the company has added two key risk factors under the Finance & Corporate category.
The company highlights that its LIBOR-based borrowings that extend beyond June 30, 2023, will have to be converted to a replacement rate as LIBOR tenors will not be available beyond that point in time. In the U.S., SOFR plus, a spread adjustment, is recommended as LIBOR’s replacement.
There are key differences between LIBOR and SOFR and thus if the rate is converted, Juniper may incur higher interest costs. This may affect Juniper’s operating results. At present, there still remains uncertainty as to which rates will replace LIBOR, and hence the magnitude of LIBOR’s end on Juniper’s borrowing costs cannot be predicted yet.
The second risk factor is associated with Juniper’s strategy to expand its software business. The success of this strategy hinges on a number of uncertainties like additional development costs; the possibility that its software products may not get widely adopted; erosion of revenue and gross margins; the impact of longer periods of revenue recognition on financial performance; regulatory compliance; data protection and privacy laws. If Juniper’s Software push does not meet growth expectations, it may hamper the company’s future financial targets, business, and financial condition.
The Finance & Corporate risk factor’s sector average is at 38%, compared to Juniper’s 35%.
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