RealTime IT News

Juniper Soars While Others Sag

In Friday's Morning Report, Tom Taulli notes that through Thursday, the ISDEX is down just 1.7 percent for the past week, a clear sign that Internet stocks are beginning to stabilize.

If you take a look at what's been happening since Tuesday, the situation looks even more promising. If the ISDEX can hang on for the rest of the day to the impressive gains it has made Friday morning - up 18.88, or 4.38 percent through noon -- it will close with a gain for the fourth day in a row.

While that doesn't necessarily mean the beginning of a rally - concerns about interest rates, the ad revenue model and exorbitantly high valuations haven't disappeared -- it seems to indicate the free-fall is over.

And a nasty plunge it has been for a number of ISDEX companies. Through Wednesday's close, 20 of the 50 companies in the ISDEX lost at least one-third of their value in the past month alone.

The biggest losers have been Sportsline USA (SPLN)(-56.74%), Healtheon (HLTH) (-54.28), iVillage (IVIL)(-46.24%) and Concentric Network (CNCX)(-46.14%).

All told, 47 of the 50 ISDEX stocks have fallen since July 14. Which means, of course, that three have gained ground in the face of the recent slump, and not just a little bit, either.

Firewall vendor Check Point Software (CHKP) is up 20.63% over the past month, while business application software maker Broadvision's (BVSN) stock has risen 18.76%.

But the biggest gainer has been Internet backbone router vendor Juniper Networks (JNPR), which since July 14 had climbed 40.37% through Wednesday.

Juniper made a huge splash with its June 25 IPO, closing the day at $98.88, a 191% gain over the $34 offer price. As have many networking stocks, Juniper's IPO benefited from investor fervor for infrastructure plays.

More impressive than its market debut has been Juniper's after-market performance, which has defied the quick-burnout pattern of many recent Internet IPOs that fade after only a few days of trading. Like a rocket ship defying the pull of gravity from an imploding planet, Juniper just kept climbing through July and into this month while other Internet stocks wilted.

On Friday shares of JNPR smashed through the $200 barrier, soaring $11.75 by 1 p.m. to hit $208.75.

Investors are showing unusual confidence in a company whose chief rival is networking giant Cisco Systems Inc. (CSCO) Indeed, Juniper's recently announced Q2 earnings of $17.6 million are dwarfed by Cisco's $3.5 billion in sales during the same quarter.

Juniper, though, is taking on Cisco in the high-end switching technology market, where Cisco is perceived as weak. Further, Juniper's routing devices are faster than Cisco's, a critical selling point for ISPs desperate for equipment that will allow them to handle more and more traffic at faster speeds.

Don't expect Juniper's stock to remain in the stratosphere. Cisco has been caught off-guard before, only to marshal its formidable resources to counter against other competitors. It will do so again, and Juniper shares will come down to a more realistic level. Still, the companylooks like a good long-term investment. Just not at $200 per share.


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