Juniper Networks (JNPR ) is one of the favorite industries for various investors of communication and network industry stock. But after poor second-quarter results, shares prices of the company are lower by 10%. Juniper is all focused with various developments and cost-cutting measures. This development offers a decent entry-point for investors looking to capitalize on undervalued stocks.
Major concern for Juniper
In the second quarter, Juniper's income hopped 7% to $1.23 billion to compliment a noteworthy operating margin of 22.3%, which has climbed from 18.9% last year after expense-cutting measures. A major issue for Juniper is not margins but growth, as its income has decelerated in each of the last three quarters on a year-over-year premise. Moreover, its third-quarter revenue standpoint of $1.17 billion suggests the organization will be well short of desires, proceeding with its pattern of decelerating development. In this segment Juniper saw growth of only 7% year over year, or $617.8 million, which was certainly not expected by investors.
Though Juniper may have an issue in routing business; however, fortunately, this was anticipated by numerous analysts researching on Juniper. Actually, the security market was accepted to be a growth stimulus for Juniper, as a lot of its clients have an expanded need to ensure to secure important data from the threat of cybercrime.
Tragically, Juniper is slacking colossally on inside security, which saw revenue decay from $126.1 million last year to simply $111.6 million this quarter. While the security segment only contributes to 10% of aggregate revenue, investors anticipated the security segment to be much better contributor, or that Juniper would put all the more vigorously into quickly developing security markets.
Investors can still rely
Prominently, Juniper has been a Wall Street top pick, with a grandiose profit, on the grounds that its routing business was so solid. Be that as it may, Juniper now ends up failing to meet expectations. Despite this concern, Juniper can still be a worthy investment for an investor. The network equipment supplier has been picking up pace as telecom and server farm has been witnessing growth.
Going ahead, financial specialists still anticipate that Juniper will keep climbing after it reported a noteworthy final quarter as its prospects look brilliant. Juniper anticipates healthy overall growth demand as it concentrates on new income development opportunities, administration quality and operational and capital proficiency ought to keep driving Juniper's execution. Demand for the Telecommunications companies is also rising, which provides about 60% of Juniper's revenue, and consequently will benefit Juniper’s growth. Juniper is also upgrading its networks to handle increased data traffic from smartphones and tablets.
Share repurchase policy and dividends declared by any company always boosts the confidence of an investor towards such companies. Juniper is one such company that has always implemented its repurchase policy with regular dividends. It recently declared a cumulative amount of $3 billion that is to be returned to the investors in the form of repurchase programs and dividends to be spread across 3 years. As per this strategic policy, Juniper has allocated $2 billion share repurchase program to be implemented by end of first quarter of 2015, this includes $1.2 billion to be executed shortly. Juniper will also initiate a quarterly dividend of $0.10 per share in the third quarter of 2014 and may increase it over time.
Juniper Networks has effectively tended to the market's requirement for superior, readiness, security, automated intelligent network systems. It has promisingly tended to its clients' most pressing prerequisites through its benefits, engineering and committed workforce.
The company maintains a fairly decent forward P/E, and Juniper's stock has a growth potential of around 35% in the next year or so. The security market might not be so revealing for Juniper, but the router and switch market is expected to grow in the coming years. Looking to such growth prospects, I feel Juniper is a good buy at the existing price for long haul.