Juniper Networks (NYSE: JNPR) Is About To Break Out

Wednesday, July 29, 2020 | Thomas Hughes
Juniper Networks (NYSE: JNPR) Is About To Break Out A Fundamental Piece Of Technology Infrastructure

Juniper Networks (NYSE: JNPR) has been a favorite of mine over the last year for several reasons. Regarding its business, it is a maker of all-things networking-related and therefore fundamental to technology infrastructure. Technology, digital technology, is taking over the world and that trend was only accelerated by the pandemic. Add to that the rise of 5G and the subsequent revolution in IoT it is expected to unleash and the future of Juniper Networks is all but assured.

Regarding its attraction as an investment, Juniper Networks is still a growing concern and a dividend payer to boot. The yield is an attractive 3.3% with share prices near $24.25 and there is a positive outlook for distribution growth. The company has increased the yield consecutively for three years and has plenty of room on the balance sheet for future increases albeit there is no guarantee. The balance sheet isn’t the strongest I’ve ever seen but it’s got a moat, if not a fortress wall around it. Debt is low, and cash, free-cash-flow, and coverage are high.

Juniper Networks Is On Track For A Decent 2020

Juniper Networks has not seen the massive increase in demand as some other tech companies but it’s business has not bee hurt by COVID-19. Revenue in the quarter was expected to fall about -5% on a YOY basis but demand held up better than expected (duh). Quarterly revenue of $1.09 billion fell a mere -0.9% from the previous year to beat consensus by 400 basis points. On the bottom line, GAAP EPS fell short by a nickel but was offset by a small beat at the Adjusted level.

“We experienced solid demand during the June quarter, as our combination of technological differentiation and go-to-market execution drove a second consecutive quarter of positive order growth,” said Juniper’s CEO, Rami Rahim. “While the global macro environment remains uncertain, the strategic importance of the global network has never been clearer and we remain confident regarding the long-term outlook for our business.”

On a sequential basis, revenue increased 9.0% from the previous quarter showing an uptick in activity that is expected to linger through 2021 at least. Guidance for the coming quarter is positive, calling for positive YOY growth that puts the company on track to at least meet the full-year consensus if not exceed it. The fourth quarter is typically Juniper’s strongest, last year the company delivered $0.58 per share, and it only needs to earn $0.51 to meet consensus.

“At the mid-point of our Q3 guidance, we expect to see sequential revenue and earnings growth. Confidence in our forecast is driven by strong backlog and strength within our Service Provider and Cloud verticals. We believe these factors should help offset continued uncertainty in parts of the Enterprise market… We expect to see sequential volume-driven improvements in non-GAAP gross margin and a more favorable customer mix during the September quarter.”

Juniper Networks Technical Outlook: Breaking Out After Earnings

Shares of Juniper have been struggling with the pre-COVID highs over the past month or two but that is changing. The 2nd quarter results and 3rd quarter outlook put this company on track to meet its pre-COVID targets and that means growth plain and simple. Today’s news has the stock trading up by 3.0% and trading just below the current high and potential resistance. Resistance is just above the $25.25 level and may be broken by the end of the day. If not, Juniper shares could be in for a fall, possibly as low as $22, but I don't see that happening.

Assuming Juniper is able to affect and maintain the breakout the outlook for higher share prices is bullish. In the near-term, a move to $26 is likely with a chance of $28 by the end of the year. Longer-term, Juniper appears to be in a reversal that could take it back to the $30 levels or higher over the next 12 months.

Juniper Networks (NYSE: JNPR) Is About To Break Out

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