Juniper Networks (NASDAQ GS:JNPR), F5 Networks (NASDAQ GS:FFIV) Benefit From Low Expectations
One thing we are starting to see in many sectors are the benefit of low expectations, as long as you don't completely blow up a quarter people seem to be relieved. Many of the consumer discretionary names are seeing this behavior and in the middle of the week we have two names in the networking group benefiting from the same ethos -
Juniper Networks Inc. (NASDAQ GS:JNPR) and F5 Networks Inc. (NASDAQ GS:FFIV). As I stated yesterday (
Apr 8: Stimulus Fire Hydrant (Worldwide) Should Benefit Networking Companies/Broadband) we can at least make some fundamental case here, unlike many other sectors who are bouncing due to "we see some stabilization at worst ever levels". Eventually valuation needs to come back to earnings, and at some point when we stop rotating from "student body left" (sell everything) to "student body right" (buy everything) companies with actual fundamental stories should separate. We don't seem to be there yet, but hopefully sometime in 2009.
Both JNPR and FFIV reported nothing special and indeed both had revenue misses on guidance but the stocks still surged, which is a net positive. Here are some samples of the views on both companies...
Juniper Networks via AP
- Shares of Juniper Networks Inc. jumped in premarket trading Wednesday after the network equipment maker said first-quarter earnings should meet forecasts even as revenue won't meet expectations.
- The Sunnyvale, Calif. company projected sales between $760 million and $765 million. Analysts expected $794.3 million, according to a Thomson Reuters poll. But Juniper said falling costs will keep adjusted earnings in line with estimates.
- Morgan Keegan analyst Simon Leopold, who has a "Market Perform" rating on the stock, told clients in a note that "the update won't come as a shock, and investors may be encouraged by the cost controls and earnings."
- In a note to investors Wednesday, Jefferies & Co. analyst William Choi said Juniper has been focused on smart investments and products that should boost its market share.
- But he kept a "Hold" rating on shares, adding, "We remain concerned in the near-term due to limited demand visibility and lower operating profitability."
Via Reuters
- ... investors focused on its outlook for higher earnings on bigger cost cuts.
- Analysts said the decline was worrying but no surprise in a weaker economy, and forecast a solid recovery once overall business conditions improve and telecommunications service providers begin investing in network equipment again.
- "Despite the continued top-line weakness, we continue to believe service provider spending, which makes up 70 percent of Juniper's revenue, is largely cyclical and reaccelerates on the other side of this cycle later in the year, or early 2010," J.P. Morgan analyst Ehud Gelblum said.
- ...
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