Juniper Networks Connects Investors With Value We like Juniper Networks (NYSE: JNPR) for a lot of reasons and think the stock is ready to move higher. Not only is it well-positioned as a networking leader it is gaining relevance in the cloud as well, and it is one of the best dividend-paying stocks in the tech sector.

Juniper Networks Is Ready To Bounce Higher

We like Juniper Networks (NYSE: JNPR) for a lot of reasons and think the stock is ready to move higher. Not only is it well-positioned as a networking leader it is gaining relevance in the cloud as well, and it is one of the best dividend-paying stocks in the tech sector. Based on the surge in digital use over the last year, the dominating presence of eCommerce, and trends we're seeing in other areas of tech the company should be able to sustain growth without putting much effort into it and it is putting effort into it.

"Momentum is strong entering the June quarter and we are confident regarding our growth prospects. We believe the success we are seeing is a result of the deliberate actions we have taken to strengthen our product portfolio and go-to-market organization, both of which are enabling us to capitalize on attractive end-market opportunities now and in the future," said Juniper's CEO, Rami Rahim.

Juniper Networks Growing And Raising Guidance, Too

Juniper Networks Q1 revenue not only beat the consensus estimates by 100 basis points but grew 7.2% from last year. The strength was driven by demand in all product categories with notable strength in cloud and enterprise solutions. On a segment basis, Product grew by 10.4% while Services posted a smaller 3.3%. In regards to the cloud, cloud-centric revenue grew by 30% while enterprise demand increased 20% across all categories. Both revenue and earnings might have been better, however, if not for the global shortage of microchips and supply chain disruptions.

Moving down the report, the company posted a bit of margin shrinkage from the 2020 Q4 period but again it was less than expected. Margins are under pressure from a variety of factors including supply chain issues, risings costs, and product mix with at least the supply chain issues and product mix expected to improve later in the year. Regardless, the adjusted operating margin is up 200 basis points from last year to help drive both adjusted earnings growth and earnings above the consensus.

On the bottom line, the GAAP EPS missed expectations due to unexpected and non-comparable one-time costs but adjusted earnings did not. On an adjusted basis the company produced $0.30 in EPS or up $0.07 from last year and a nickel ahead of the consensus.

Turning to the guidance, the company is expecting sequential growth to resume with the next quarter and for the full year to produce solid YOY gains. The second-quarter guidance is calling or revenue in the range of $1.14 billion versus the consensus $1.12 and for EPS in range with the mid-point above consensus. This is already leading to a round of analysts' price-target hikes but so far no movement on the consensus rating which is still a hold. The consensus price target among the three most recent is near $2.7.25 or about a 10% upside.

Juniper Is Undervalued And A High-Yield

Juniper is undervalued trading at only 15X this year's earnings and 13X next. The S&P 500 is trading closer to 22X its earnings and other high-quality dividend payers in the tech sector are trading much higher (with smaller yields). As for the yield, the stock is paying about 3.15% with shares trading near $25 and it is a safe payout. Not only is the company committed to paying the distribution but it has the money to do it. The payout ratio is under 50% of earnings, earnings are growing, and the balance sheet is in great shape. The company is well-capitalized even after investments made over the past year and has low leverage and good coverage. Add to that a tendency to increase the payout annually at a 15% rate and we think Juniper very attractive for dividend-growth investors.

The Technical Outlook: Juniper Pulls Back Into A Buying Opportunity

Shares of Juniper began the day higher on the earnings strength and optimistic outlook but couldn't hold the gains. By midday, shares were down about 1.0% and trading at a key and psychologically significant' support level. Support is present at the $25 level and may hold up until the bulls can rally again. If not we see this stock moving down to the $24.50 or $25 level before consolidation and rebound. In either case, we think Juniper is a buy.

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