Juniper: Growth in the Cloud

07/05/2017 2:56 am EST


Richard Moroney

Editor, Dow Theory Forecasts

You may not be able to see the products made by Juniper Networks (JNPR), but if you watch television, talk on the phone, or bank online, you probably use them, says Richard Moroney, editor of Dow Theory Forecasts.

The company sells equipment spanning the breadth of the computer-networking business, building and managing communications systems for both commercial and government customers.

Products that route data from one place to another generated 43% of company revenue in the March quarter, while switches generated another 20% and security products 5%.

Switching revenue jumped 38% in the quarter, mostly on the strength of the cloud business. The remaining 32% of revenue came from services, an increasingly important part of the networking market. Services revenue rose 14% in the quarter, outstripping the 10% gain in product sales.

Juniper is best known for its telecom routers. But, like many tech peers, the company is making a larger portion of its sales to cloud users these days. Cloud computing involves remote networks of servers accessed via the internet, instead of hardware on a company’s premises.

Juniper shares trade at 13 times trailing earnings, a 33% discount to their own three-year average and 21% below the median for communications-equipment companies in the S&P 1500 Index.

Juniper targets the return of 50% of free cash flow to shareholders this year. Over the last 12 months, the company generated $1.13 billion in free cash flow and spent $459 million (41% of free cash flow) on dividends and buybacks, with buybacks accounting for about two-thirds of the money.

The company’s target points to more buybacks, continuing a trend that has reduced the share count by 22% over the last three years.We have initiated coverage of Juniper as a long-term buy. 

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