These 2 Stocks Offer Compelling Risk/Reward? Juniper Networks, Inc. (JNPR) and Discovery Communications Inc. (DISCA)
New York, NY – GDP INSIDER – 04/15/2014.
This article discusses two companies: Juniper Networks, Inc. (NYSE:JNPR) and Discovery Communications Inc. (NASDAQ:DISCA)
Juniper Networks, Inc. (NYSE:JNPR) shares were up yesterday and reacted positively to news that Alcatel-Lucent was in merger talks with Nokia. The networking sector is in the midst of some broad changes with a growing number of companies in China competing in the space also the increase in software-based alternatives over hardware purchases. The new software alternatives allow telecom companies like AT&T to use a software solution that can allow them to cut capital costs by up to 75%. Telecoms are the largest customer group from networking firms like Juniper. This new type of software networking solutions, called SDN, has led telecom companies to delay some purchases and reduce capex budgets. They are waiting for the new technology to emerge. This is a potential challenge for networking hardware manufacturers like Juniper. Depending on where they stand with SDN, it could be a benefit for present challenges to the business going forward.
Discovery Communications Inc. (NASDAQ:DISCA) Series A shares made the list of 19 stocks that Goldman Sachs recommended to short. The stock is down by 4% year-to-date and by 16% over the past year. Neither the RSI nor MFI indicators lend any support or expectations that the shares should increase in value. The technical indicators do not show it should move up or down in value. Discovery’s valuation could be considered rich by many on the Street at 19.9x trailing twelve months earnings. The stock did well earlier this year on news of possible M&A activity, in particular on merger talks with Fox. While these did not pan out, the company’s content has wide appeal. Discovery Communications Inc can also expand internationally to further boost growth. International markets contribute about half of all sales at Discovery. The big issue with DISCA shares is that owning it at this valuation despite the growth may carry more risk than reward.
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