Nobody knows if the rally will continue in the near term, but we believe that over time the economy will grow, profits will expand and stock prices will increase, suggests John Buckingham; here, the editor of The Prudent Speculator reviews two techs offering growth, income and value.
Juniper Networks (JNPR) provides internet infrastructure solutions for ISPs and other telecom service providers. The company designs IP routing, Ethernet switching, security and application acceleration solutions. Juniper reported Q2 EPS of $0.55 and revenue of $1.43 billion, both ahead of the consensus estimates, but shares fell after management warned of near-term weakness in Cloud and Service Provider orders.
Project timing and existing order digestion were the primary culprits and year-over-year growth is expected to return as soon as Q4. For Q3, JNPR expects EPS between $0.49 and $0.59 with revenue between $1.34 billion and $1.44 billion. Juniper’s unusually large backlog is normalizing and lead times are coming down.
These dynamics are worrying for investors that have become accustomed to pandemic-era delays and supply chain challenges, but we think in this phase, a retreating order book means that JNPR is free to make pushes that generate organic growth and bring new customers into the fold.
We like that JNPR has a high renewal rate with existing customers and that demand for its enterprise-geared and AI-driven ‘Mistified’ suite is benefitting from substantial customer interest. Juniper trades with a forward P/E of 12, well below the IT sector, and the yield is 3.2%.
It has been a bumpy ride this year for shareholders of Seagate Technology (STX). After a strong start to the year, an awful fiscal Q3 report sent shares plunging. A smaller-than-expected loss in Q4 (-$0.18 vs. -$0.25 est.) and management comments indicating the implementation of more cost controls pushed the shares up 7%, bringing the year-to-date rally to 25%.
CEO Dave Mosley said the company is adjusting pricing and carefully managing manufacturing capacity to ramp up production. Mr. Mosley expects A.I. to become a long-term driver for STX, calling it the latest in a series of “megatrends,” concurrent to the Cloud build-out.
We think the data storage provider is positioned nicely, while Seagate sports a solid balance sheet (with the necessary cash flow to return it to its pre-pandemic health). The forward P/E is projected to come down near 11 by fiscal 2026 as the company’s sales generation and margin-widening efforts trickle down to earnings. STX yields a hefty 4.4%.
