(Reuters) - Shares of Juniper Networks Inc (JNPR.N) rose 15 percent after the company said telecom spending is set to grow, signaling that the worst may be over for the network gear maker.
Juniper and rival Cisco Systems Inc (CSCO.O) have been impacted in the past year as telecom service providers delayed expansion on a faltering U.S. recovery and weakness in Europe.
"Our two-part thesis for Juniper consists of a better-than-expected service provider demand in the second half and significant operating leverage as Juniper ramps higher margin new products," ISI analyst Brian Marshall wrote in a note.
Marshall said AT&T Inc's (T.N) capital spending will bounce-back after a relatively quiet first half, and Juniper is likely to benefit.
AT&T accounts for nearly 7 percent of Juniper's revenue, while telecom customers contributes over 60 percent.
Both backlog and book-to-bill ratio -- a measure of how much of a company's manufacturing capacity is utilized -- rose during the quarter, signaling a return in orders.
Juniper on Tuesday reported second-quarter results above Wall Street expectations, but forecast third-quarter below estimates as worries over Europe still linger.
"With a strong quarter beat, a conservative guide, and a new product lineup that will slowly ramp into a wider target audience through 2013, there may be some room for shares to return to a more normal trading range," said FBR analyst Scott Thompson.
He raised his price target on the stock to $17 from $14.
Juniper shares, which have halved in value in the last year, were trading up 12 percent at $16.58 on Wednesday on the New York Stock Exchange. They touched a high of $17.00 earlier.
Reporting by Himank Sharma and Chandni Doulatramani; Editing by Sriraj Kalluvila