Juniper Networks (JNPR) a Laggard Buy During Pandemic Times

Network solutions provider Juniper Networks NASDAQ: JNPR shares have been in a downward trajectory even before the coronavirus outbreak that triggered a (-35%) plunge in the S&P 500 NYSEARCA: SPY. Shares peaked at $30.81 in November 2018 and have since been in a monthly downtrend that capitulated at a low of $15.20 on March 16, 2020. The worldwide acceleration of bandwidth capacity demand has caused a surge optical fiber and networking companies like Ciena NASDAQ: CIEN and Cisco Systems NASDAQ: CSCO. Juniper Networks remains a laggard during these pandemic times as markets overlook this key internet infrastructure player. The same surge in data center demand driven by telework and remote internet activity should be reflected in Juniper shares. Prudent investors shouldn’t chase but wait for these opportunistic pullback entries when they present themselves.

The Turnaround Quarter

FY 2019 net revenues fell (-4.4%) YoY and Non-GAAP net income dropped (-10%) YoY to $597.5 million.  Juniper reported modestly improved Q4 2019 earnings on Jan. 27, 2020, indicating signs of a turnaround starting in Q4. The company beat EPS estimates by + $0.01 at $0.58, revenues rose 2.3% year-over-year (YoY) to $1.21 billion compared to $1.19 billion consensus analyst expectations. Operating margins dropped by 21% YoY in Q4 2019. They did raise the quarterly dividend to $0.20-per share. The Q1 2020 guidance was lowered to EPS range of $0.24 to $0.30 versus $0.32 analyst estimates. The bar has been set low moving forward. Shares initially sold off towards the 23.42 Fibonacci (fib) level , but rebound back up to the $25.01 fib resistance

COVID-19 Driving Data Center Demand

With over 100 million people under mandatory lockdown, the surge in internet traffic driven by work and learn from home activities has driven data center capacity demand through the roof. Intel shocked investors with the stunning spike in their Data Center Group revenue growth before the COVID-19 pandemic. Samsung Electronics OTCMKTS: SSNLF attributed their recent Q1 2020 earnings surprise to data center demand stemming from the coronavirus impact. Juniper being a key player in the very hardware of the internet, routers and switches, should surprise investors with the demand surge especially after setting the bar low with their latest earnings guidance. Any upbeat update could change sentiment quickly. The key question is whether the market has already figured this out and priced in the demand surge. It may already have as evidenced by the recovery bounce back to the back to the Q4 2019 earnings reaction near $22.52.

Opportunistic Buy Levels

Using the rifle charts on wider time frames to lay out the playing field is suitable for swing traders and investors. JNPR shares have been on a monthly downtrend since peaking in December 2019. Despite the rally to new all-time highs by the SPY, JNPR has continued to sell fade the macro market and continue to make lower lowers. The COVID-19 market sell-off accelerated the capitulation phase for JNPR shares. Shares bottomed out at $15.20 and snapped back up towards the $22.52 resistance, just shy of the $24.38 pre-pandemic levels on Feb. 19^th  where the SPY hit all-time highs at $339.08 before falling off the cliff by (- 35%) in the next three weeks. In relative terms, JNPR has almost recovered all its pre-pandemic gains. This could be evidence of the market pricing in the unexpected demand surge, which mandates exercising patience for a pullback entry. The daily stochastic pup and mini pup has room to the upper Bollinger Bands (BBs) at the $23.59 fib, where we can expect a near-term top. Therefore, it’s prudent to await pullbacks for opportunistic entry levels rather than chase entries. Assuming JNPR peaks as the daily stochastic cross back down under the 80-band, we can look for the weekly 5-pd MA to retest at the $19.93 level if the monthly 5-pd MA resistance maintains at $21.92. There are four opportunistic entry levels of which higher prices bear the greater risk. These are the four opportunistic entry levels: $20.53 sticky 5s zone/fib, $19.66 fib, $17.76 overlapping fib and $16.87 trendline/weekly lower BBs. Traders can use these and in-between fib levels to scalp reversions utilizing stochastic direction confluence on intraday time frames. Swing traders can scale for overnight to multi-day holds on low band daily stochastic. Long-term investors may consider a dollar-cost averaging approach with income generation through writing covered calls.