Over the past two decades or so, technology has evolved, and over time the benefits of using the internet have become obvious to the public. Moreover, increased adoption and implementation of cloud services and hybrid work structures are propelling the networking industry’s growth. Currently, 4.95 billion people use the internet daily worldwide. This figure underscores a 6.2% year-over-year growth, which has been the fastest since 2019. In the United States alone, close to 299 million people accessed the web in 2022.
Furthermore, revenue for the networking infrastructure market is forecasted to reach $197.40 billion in 2022. According to Statista, the market is expected to reach $229.70 billion by 2026, growing at a CAGR of 3.9%.
The Invesco Dynamic Networking ETF (PXQ) gained 2.9% over the past month, compared to the S&P 500’s marginal gains over the same period. Hence, we think the fundamentally sound networking stocks Juniper Networks, Inc. (JNPR), Extreme Networks, Inc. (EXTR), and Nokia Oyj (NOK) could soar in the near future and hence, might be solid buys now.
Juniper Networks, Inc. (JNPR)
JNPR is a developer and marketer of networking products, including routers, switches, network management software, network security products, and software-defined networking technology. The company offers its products for end-users in the cloud, service providers, and enterprise markets.
On June 7, JNPR and cybersecurity company Dragos announced their joint partnership to secure critical infrastructure, which is expected to provide cybersecurity visibility across IT and OT domains. This might prove to be profitable for the company.
The company announced the expansion of its SASE offering with the addition of Cloud Access Security Broker (CASB) and advanced Data Loss Prevention (DLP) capabilities to its Juniper Secure Edge solution. Samantha Madrid, Group VP of Security Business & Strategy, JNPR, stated, “Now, with the addition of CASB and DLP, Juniper addresses these concerns with a full-stack SASE suite of capabilities that are flexibly adopted and deployed while extending Zero Trust principles already implemented across the network to the cloud.”
JNPR’s total net revenues increased 8.7% year-over-year to $1.17 billion in the first quarter ended March 31. Non-GAAP net income and non-GAAP net income per share came in at $101.60 million and $0.31, up 3.1% and 3.3% from the same period last year. Non-GAAP operating income improved 5.6% from the prior-year quarter to $137.40 million.
The consensus EPS estimate of $0.45 for the second quarter (ending June 2022) indicates a 3.5% year-over-year improvement. Likewise, the consensus revenue estimate of $1.26 billion for the same quarter reflects a rise of 7.3% from the same period last year. Moreover, JNPR has an impressive surprise earnings history, as it has topped consensus EPS estimates in three out of the trailing four quarters.
The stock has gained 10.4% over the past year and 0.6% intraday to close yesterday’s trading session at $30.89
JNPR’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
JNPR is also rated a B in Growth, Value, and Quality. Within the Technology - Communication/Networking industry, it is ranked #5 out of 54 stocks. To see additional POWR Ratings for Sentiment, Stability, and Momentum for JNPR, click here.
Extreme Networks, Inc. (EXTR)
EXTR operates as a software-driven networking solutions provider that designs, develops, and manufactures wired and wireless network infrastructure equipment and engages in the development of software.
The company recently introduced a suite of new solutions, extending its ExtremeCloud portfolio to include new SD-WAN and AIOps with digital twin capabilities. The new suite of solutions might add significantly to the company’s revenue stream.
In May, the company announced an increase in its share repurchase authorization to $200 million over a three-year period beginning in its upcoming fiscal year starting from July 1. This might bolster the company’s shareholder returns.
In the third fiscal quarter ended March 31, EXTR’s net sales came in at $285.51 million, up 12.7% year-over-year. Non-GAAP net income and non-GAAP net income per share rose 32.6% and 31.3% from the prior-year period to $27.42 million and $0.21.
Analysts expect EXTR’s revenue for the fiscal year 2022 (ending June 2022) of $1.10 billion to increase 9.3% year-over-year. For the same year, Street expects EPS to improve 35.8% from the prior year to $0.77. EXTR has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
EXTR has gained 3.3% over the past month and is currently trading at $10.16. It has gained 2.6% over the past five days.
It is no surprise that EXTR has an overall A rating, which translates to Strong Buy in our POWR Rating system. The stock has a B grade for Growth, Value, and Quality. It is ranked #2 in the Technology - Communication/Networking industry.Beyond what we’ve stated above, we have also given EXTR grades for Momentum, Stability, and Sentiment. Get all the EXTR ratings here.
Nokia Oyj (NOK)
NOK is an Espoo, Finland-based multinational company that offers mobile, fixed, and cloud network solutions. The company operates through the four broad segments of Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies.
This month, NOK announced its partnership with DOCOMO and NTT to develop key technologies for 6G jointly. The collaboration will focus on two proofs-of-concept for emerging 6G technologies. This collaboration might benefit the company by helping realize 6G technologies.
In May, NOK announced the strengthening of its partnership with Microsoft Corporation (MSFT) with plans to integrate Microsoft Azure Arc capabilities into the Nokia MX Industrial Edge (MXIE) platform. Stephan Litjens, Vice President, Nokia Enterprise Solutions, said, “Our extended collaboration with Microsoft will enable and enhance the performance of Industry 4.0 mission critical applications allowing our customers to tap into Microsoft Azure Arc in the cloud and on the customer premise’s edge.”
For the first fiscal quarter of 2022, NOK’s net sales increased 5.4% year-over-year to €5.35 billion ($5.72 billion). The gross margin grew 270 basis points to 40.6%. Net cash and interest-bearing financial investments rose 32.9% from the same period last year to €4.90 billion ($5.24 billion).
Street EPS estimate for fiscal 2023 of $0.47 indicates an increase of 6.4% from the prior year. Likewise, Street revenue estimate for the same year of $25.69 billion reflects a rise of 2.5% year-over-year. NOK has beaten consensus EPS estimates in each of the trailing four quarters.
Over the past three months, NOK’s stock has gained 11.9% and 2.2% over the past month to close yesterday’s trading session at $5.07.
NOK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system.
NOK has a B grade for Value. It is ranked #11 in the Technology - Communication/Networking industry. Click here to see the additional POWR Ratings for NOK (Growth, Momentum, Stability, Sentiment, and Quality).
JNPR shares were trading at $30.30 per share on Wednesday afternoon, down $0.59 (-1.91%). Year-to-date, JNPR has declined -14.05%, versus a -13.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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