Juniper Networks (NYSE: JNPR) is undergoing a significant transformation to its core business due to a prolonged slowdown in service provider spending. The technology hardware company has had a difficult 2019 due to weak service provider demand. However, things turned better in Q4 2019 led by the company’s cloud and enterprise verticals which more than offset weakness within the service provider business. Juniper’s stock steeply declined after Q4 2019 results mainly due to soft guidance, overlooking the company’s strong Q4 2019 performance. We believe that the market overreacted to the news and Juniper’s stock is undervalued and estimate Juniper’s valuation to be around $25, which is roughly 10% ahead of the current market price. Our price estimate takes into account the most recent earnings as well as the company’s guidance for the current fiscal year.
Fiscal Q4 2019 Earnings Recap, and FY 2020 Guidance
Juniper delivered a strong performance for its fiscal fourth quarter, with the company beating consensus estimates for earnings and revenues.The company's total revenue increased by 2% year-over-year to $1.2 billion, driven by strength in the cloud and enterprise verticals, partially offset by weakness in the service provider business.Moreover, the company reported non-GAAP earnings per share of $0.58, above the mid-point of its guidance range due to steady revenue growth. However, Juniper provided a rather bleak outlook for 2020.The company expects modest revenue growth while the gross margin is expected to be flat to slightly up versus 2019 levels. Additionally, the company expects higher non-GAAP operating expenses as compared to 2019, likely weighing on the company's profits.