Juniper, F5: Merrill Downgrades Both To “Underperform”
Posted by Eric Savitz - September 24, 2008, 11:34 am
Merrill Lynch’s Tal Liani this morning cut his ratings on both Juniper Networks (JNPR) and F5 Networks (FFIV) to Underperform from Neutral - and both stocks are suffering the consequences. Liani notes in his F5 note that he is seeing evidence of “a general order slowdown” in the service provider market, with weakness as well in the financial services segment, for obvious reasons.
For Juniper, Liani cuts his price target to $24, from $27, noting that he expects Juniper “to eventually face the slowdown most other networking vendors are seeing.” He notes that other providers of “capacity” products to telcos, including routers, switches and long-haul optical gear, have reported slower spending. (That includes Ciena and Cisco.) “We think Juniper is currently benefiting from product introductions and large deployment contracts with the likes of Verizon and AT&T, but believe that the impact of these will subside soon.” He also notes that at 18x 2009 EPS, Juniper is among the highest priced stocks in the sector.
For F5, he cuts his price target to $25, from $35. He notes that 40%-plus of the company’s business comes from the financial segment and telcos, “where we would expect a tighter grip on spending, including technology products.” Liani writes that he is not making a short-term call on the quarter here, but rather is concerned about the possible direction of estimates. That said, he notes that networking vendors tend to book 35%-40% of their revenues in the last month of the quarter, and cautions that “the timing and the extent of the recent events could spell near-term trouble for F5’s current quarter.”
This morning, Juniper is down 92 cents, or 3.8%, to $23.31; F5 is down $1.86, or 7.7%, to $22.25.
o~~~ O |
