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Juniper's Improving Demand Drives Goldman Forecasts For A Q2 Beat

Goldman Sachs’ Simona Jankowski expects Juniper Networks, Inc. JNPR 1.22% to report a modest Q2 beat and see sequential improvements throughout 2016. Jankowski maintained a Buy rating on the company, with a price target of $31.

Q2 Beat Expected

The analyst explained that the Q2 beat was expected due to the improving service provider spending environment and product cycle, following the weakness seen in Q1.

Jankowski mentioned that the Q2 VAR survey revealed that Juniper Networks was “tracking above plans for the VARs, with strength in routing.”

The analyst expects “sequential improvements through the rest of the year as Tier 1 capex is more back-end loaded, and Juniper benefits from the ramp of its new switching and routing product cycles.”

In addition, the analyst expects the completed cost cutting program and revenue ramp to drive the company’s operating leverage, with the 2016 operating margin estimate 70 bps ahead of the consensus expectations.

Expectations For 2H

However, Jankowski also expects above-seasonal capex for U.S. carriers in 2H, given that a majority of the large service providers have maintained their full year capex guidance, despite the capex miss in 1Q.

“Looking into 2H, we expect Juniper to benefit from the ramp of its new switching and routing product cycles. Juniper expects the QFX10000 data center switching family to be the largest contributor to revenue growth, followed by routing and security,” Jankowski stated.

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DateFirmActionFromTo
Jul 2016Deutsche BankDowngradesBuyHold
May 2016William BlairDowngradesOutperformMarket Perform
Apr 2016UBSDowngradesBuyNeutral

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