Business News / Stocks

Juniper Networks Downgraded to Market Perform

Juniper Networks (JNPR) received an investment-rating downgrade and price-target cut from BMO Capital Markets despite the network-technologies company’s late-Thursday report of better-than-expected Q2 results, as its guidance for Q3 came in below Street views.

BMO now has an investment rating of market perform on Juniper’s shares, down from outperform. Its new price target from BMO is $27 per share, down from $30. While the reduced target is below Juniper’s Thursday closing price of $28.25, it is slightly above the stock’s recent Friday pre-market level as the shares fell 7.3% pre-market to $26.20.

In a note to clients, BMO described Juniper’s Q2 results as solid but the Q3 guidance as weak. “We do not think there will be adequate visibility into the cloud business for the next several quarters, and we are unsure of the extent to which revenue growth will return once the transition is complete,” the firm said.

BMO lowered its estimates for Juniper’s 2018 and 2019 earnings per share, saying the lower estimates were “mainly due to our lower cloud revenue expectations.” It added: “We see valuation support, but limited catalysts and cloud risks.”

After Thursday’s market close, Juniper reported Q2 adjusted earnings per share of $0.48, down from $0.57 a year earlier but above analysts’ mean estimate according to Capital IQ of $0.44. Total net revenue slipped to $1.20 billion from $1.31 billion a year earlier but surpassed analysts’ mean estimate of $1.18 billion.

However, for Q3, the company forecast adjusted EPS of $0.41 to $0.47 on revenue of about $1.14 billion to $1.20 billion, missing analysts’ mean estimates heading into the guidance for $0.51 and $1.22 billion, respectively. The Street consensus views have since come down to $0.44 and $1.18 billion, respectively.

Juniper noted its Q3 revenue guidance “reflects stronger-than-expected Q2 business, particularly in enterprise and the timing of certain cloud and service-provider deployments which are taking longer to materialize.” Still, it added: “While customer spending remains dynamic and difficult to predict, we continue to expect a return to year-over year growth during the fourth quarter.”