The technology sector is constantly evolving and coming up with innovations, driving the prospects of companies leading the fast-forward changes. In this piece, I have compared two tech stocks, Juniper Networks, Inc. (JNPR) and BlackBerry Limited (BB), to determine which has more room for growth. I find JNPR a better pick for the reasons explained throughout this article.
JNPR surpassed the consensus EPS and revenue estimates during the second quarter. Its EPS beat the analyst estimates by 6.9%, while its revenue came 1.1% above the consensus estimate.
JNPR’s CEO Rami Rahim said, “We delivered better than expected results during the June quarter as our teams continued to execute well, and we benefited from improved supply. We were particularly encouraged by the momentum we experienced in our Enterprise business, which not only had a record quarter but also represented both our largest and fastest growing vertical for a third consecutive quarter.”
“Our Mist AI platform continues to win in the market, driving record revenue for our wireless, wired switching, and SD-WAN offerings, along with a record number of full-stack wins, in the Q2 period,” he added.
The company said that it is currently facing some order weakness from its Cloud and, to a lesser degree, from its Service Provider customer. However, the company remains confident of delivering long-term growth driven by its Enterprise business’s momentum and the Cloud business’s gradual recovery.
JNPR forecasted its revenue for the third quarter to be $1,385 million, plus or minus $50 million. Its non-GAAP gross margin is expected to be approximately 58.5%, plus or minus 1%. The company’s non-GAAP net income per share is forecasted to come in at $0.54, plus or minus $0.05.
On the other hand, BB posted a surprise profit during the first quarter as its cybersecurity business benefited from higher client spending. The company reported an EPS of $0.06 during the first quarter, compared to analyst estimates of a loss per share of $0.05. BB’s revenue topped the consensus estimate by 134.2%.
BB’s CEO and Executive Chair, John Chen, said, “This quarter, we delivered sequential revenue growth in our Cybersecurity business unit. Revenue growth was driven by a year-over-year increase in billings and pipeline, anchored on strength in our core verticals, particularly government.”
“In our IoT business unit, we saw some temporary delays to the start of new programs as a number of customers review their plans to capitalize on the software-defined vehicle (SDV) trend, impacting revenue this quarter. However, we see no change to the strong secular trends that are a multi-year tailwind for QNX and Blackberry IVY. We continue to expect to achieve revenue consensus for both our IoT and Cybersecurity business units this fiscal year,” he added.
On May 1, 2023, BB announced that its Board of Directors would initiate a review of its portfolio of businesses. The assessment seeks to assist the Board as it considers various strategic alternatives to enhance shareholder value. Fast forward to August, sources say that private equity firm Veritas Capital has offered to buy BB.
For fiscal 2024, BB expects its total revenues to come between $665 million and $700 million. Its IoT business (excluding IVY) is expected to come between $240 million and $250 million, and its Cybersecurity business’ revenues are expected to be between $425 million and $450 million.
When it comes to price performance, BB is the clear winner. BB’s stock has gained 43.3% over the past six months, compared to JNPR’s 5.4% decline. In addition, BB’s stock has gained 70.6% year-to-date, compared to JNPR’s 8.9% decline.
Here are the reasons I think JNPR could perform better in the near term:
JNPR’s total net revenues for the second quarter ended June 30, 2023, increased 12.6% year-over-year to $1.43 billion. Its non-GAAP operating income rose 36.9% over the prior-year quarter to $242.10 million. The company’s non-GAAP net income increased 38.6% year-over-year to $189 million. Also, its non-GAAP EPS came in at $0.58, representing an increase of 38.1% year-over-year.
For the fiscal first quarter ended May 31, 2023, BB’s revenue increased 122% year-over-year to $373 million. Its adjusted gross margin increased 71.4% over the prior-year quarter to $180 million. The company’s adjusted net income came in at $35 million, compared to an adjusted net loss of $11 million in the prior-year quarter. Its adjusted EPS came in at $0.06, compared to an adjusted loss per share of $0.05 in the year-ago quarter.
Additionally, its adjusted EBITDA came in at $41 million, compared to an adjusted EBITDA loss of $21 million in the year-ago quarter. Also, its adjusted operating income came in at $35 million, compared to an adjusted operating loss of $27 million in the year-ago period.
Expected Financial Performance
Analysts expect JNPR’s EPS for fiscal 2023 and 2024 to increase 14.3% and 6.2% year-over-year to $2.23 and $2.37. Its fiscal 2023 and 2024 revenue is expected to increase 5.6% and 0.4% year-over-year to $5.60 billion and $5.62 billion.
For fiscal 2025, BB’s EPS is expected to increase 140.7% year-over-year to $0.05. Its fiscal 2024 revenue is expected to increase 34.1% year-over-year to $879.51 million. On the other hand, its fiscal 2025 revenue is expected to decline 11.5% year-over-year to $778.02 million.
JNPR’s revenue grew at a CAGR of 8.6% over the past three years, compared to BB’s negative 4.8% revenue growth during the same period. JNPR’s total assets grew at a CAGR of 2.4% over the past three years, compared to BB’s negative 19.6% growth.
JNPR’s trailing-12-month revenue is 6.6 times what BB generates. JNPR is more profitable, with a net income margin and Return on Equity of 7.27% and 9.57%, compared to BB’s negative 65.51% and 50.27%, respectively. Also, JNPR’s Return on Assets of 5.51% compared to BB’s negative 7.06%.
In terms of trailing-12-month Price/Book, JNPR is currently trading at 2.08x, 44.5% lower than BB’s 3.75x. JNPR’s trailing-12-month Price/Sales ratio of 1.62x is 56.5% lower than BB’s 3.72x.
Thus, JNPR is relatively more affordable.
JNPR has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, BB has an overall rating of C, translating to a Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. JNPR has a B grade for Quality, in sync with its high profitability. On the other hand, BB’s D grade for Quality justifies its poor profitability.
JNPR and BB have a C grade for Value, consistent with their mixed valuation.
Of the 52 Technology – Communication/Networking stocks, JNPR is ranked #9, while BB is ranked #33 in the same industry.
Although its revenues are expected to remain under pressure over the next few quarters, JNPR has provided a solid outlook for the third quarter, driven by the strength of its enterprise business and the gradual recovery of its cloud business. In addition, the company focuses on expanding its non-GAAP operating margin by over 100 basis points.
On the other hand, although BB reported a surprise profit, its primary Cybersecurity and IoT business segments reported declining revenues over the prior-year quarter. Its Cybersecurity segment has been reporting a decline in revenue over the past few quarters. However, its Licensing and Other segment grew strongly in selling certain patents.
The company remains confident of achieving revenue consensus for its IoT and Cybersecurity businesses this year, driven by the strengths of QNX and BlackBerry IVY. However, macroeconomic headwinds and intense competition from larger cybersecurity peers are some of the headwinds for the company.
Given JNPR’s better fundamentals, favorable analyst estimates, and high profitability, it could be wise to buy the stock now. On the other hand, it could be wise to wait for a better entry point in BB, given its mixed financials and analyst estimates.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all top-rated stocks in the Technology – Communication/Networking industry here.
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JNPR shares were trading at $29.20 per share on Friday morning, up $0.08 (+0.27%). Year-to-date, JNPR has declined -6.60%, versus a 19.22% rise in the benchmark S&P 500 index during the same period.
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