Though Juniper Networks (JNPR) - Get Reporthas beaten Wall Street's earnings estimates in four straight quarters, shares of the enterprise security specialist have been punished over the past three months, falling almost 20%, compared to just 9% declined in the S&P 500 (SPX) index.
But after Juniper issued weak guidance for its second quarter Wednesday, while announcing the resignation of its CFO, many of the risks we highlighted two months ago about its then-pricey valuation were confirmed. Juniper stock is down some 10% on the news, and with no clear floor to be found, investors are left asking themselves just how far the shares might fall.
Headquartered in Sunnyvale, Calif., Juniper on Wednesday reported fourth-quarter fiscal 2015 earnings of $197.8 million, or 51 cents a share. When excluding one-time items, earnings came to 63 cents a share, which beat analysts' estimates by 4 cents. Revenue surged 20% from a year ago to $1.32 billion, which also exceeded analysts' estimates of $1.30 billion.
Based on that, it would seem that Juniper, once thought to be losing market share to the likes of Cisco Systems (CSCO) - Get Report and F5 Networks (FFIV) - Get Report , is holding its own in the realm of routing and switching -- a point recently made by analysts at Deutsche Bank, who recently upgraded JNPR shares from a hold to a buy. Juniper has a solid business franchise that is steadily gaining market share, the analysts noted.
But that confidence wasn't borne out by the company's first-quarter outlook, which spooked investors. For the current quarter, Juniper is forecasting adjusted EPS of 42 cents to 46 cents, while revenue is expected to be about $1.17 billion -- below analysts' consensus estimates of 47 cents a share on $1.19 billion in revenue.
Complicating matters, the company announced that it is appointing Senior Vice President of Finance Ken Miller to replace Chief Financial Officer Robyn Denholm, who is resigning following the filing of its 10-K. That transition will take time, which exposes Juniper to some near-term risks. Given those factors, not to mention the tepid outlook, it's tough to recommend these shares, especially after we correctly called the risks.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.