Goldman Sachs says buy Juniper Networks, sees nearly 25% upside for the stock

Investors should look beyond near-term headwinds to spot the wrong Juniper Networks' endeavor business, according to Goldman Sachs.

Analyst Michael Ng initiated sum of the web hardware banal with a bargain rating. Ng acceptable a terms people of $39, which implies an upside of 24.5% from wherever the banal closed Monday.

He said the banal volition person near-term challenges related to fund scrutiny and pugnacious comparable periods that volition beryllium hard to replicate. A cardinal statement is besides swirling connected whether aboriginal maturation volition travel from caller subscribers oregon from the institution moving done its backlog — which was built up arsenic a effect of proviso concatenation and logistics challenges that drove up pb times. The company's 2022 backlog was higher than pre-pandemic levels astatine much than $2 billion.

But the 2023 backlog should easiness arsenic a effect of the proviso concatenation moving itself retired and slowed maturation successful caller orders. Despite the imaginable for mislaid gross owed to backlog churn and the chill connected caller orders, Ng said the institution volition payment from a absorption connected its endeavor business.

Ng said the cloud-ready information halfway volition payment from secular trends successful 400G adoption, hybrid multi-cloud and software-based web absorption tools. Juniper's caller efforts to summation its endeavor income and amended relationships with transmission partners should besides assistance the company, helium said.

"We expect halfway underlying request for JNPR products to beryllium supported by secular trends (e.g., 400G, metro, software-based absorption platforms) and a re-focused endeavor strategy, though we admit that pugnacious comps & macro-driven fund scrutiny volition beryllium headwinds successful the adjacent term," helium said successful a enactment to clients.

While determination whitethorn beryllium immoderate challenges owed to lowered endeavor IT walk and unreality expenditure budgets, the institution has focused connected gathering an automated offering to conscionable an accrued concern accidental successful metro areas. Juniper is besides expected to put successful a benignant of work router to enactment the metro routing business.

He besides said the institution has a notable accidental successful the artificial quality space. Jumpier acquired Mist AI successful 2019.

That helps arsenic the institution looks to determination its endeavor concern distant from conscionable being an alternate to competitors toward its ain unsocial offering, helium said. Juniper has done truthful by bringing wireless and bundle absorption capabilities into its endeavor field portfolio and investing successful its go-to-market organization.

Enterprise was the fastest-growing concern vertical successful 2022, according to Ng, and is expected to clasp that rubric implicit the agelong term.

Juniper shares roseate 1.5% successful aboriginal premarket trading. The banal has lagged the broader marketplace successful 2023, losing astir 2%, portion the S&P 500 is up 5.4%.

— CNBC's Michael Bloom contributed to this report.