Investing.com - Juniper Networks Inc (NYSE:JNPR)' stock could drop by about 5% if its merger with Hewlett Packard Enterprise (NYSE:HPE) fails, Citi analysts said in a note on Tuesday.
Citi's warning follows a Bloomberg report suggesting the U.S. Department of Justice (DOJ) could decide this week whether to challenge the deal.
Analyst at Citi estimated Juniper's stock could fall to $33, based on a historical premium to rival Cisco Systems (NASDAQ:CSCO) or a forward price-to-earnings multiple of 16.3 applied to Juniper's projected 2026 earnings.
Juniper shares closed at $35 on Tuesday.
Speculation is mounting that the companies might delay finalizing the merger until January, hoping for a more favourable regulatory environment under the incoming Trump administration.
In January, HPE said it was acquiring the networking equipment manufacturer for $14 billion in an all-cash deal, to enhance the company's AI offerings. HPE has offered $40 per share to Juniper shareholders.
The transaction is expected to be funded through financing commitments for $14 billion in term loans and is likely to close in late 2024 or early 2025, subject to regulatory approvals.
The acquisition is expected to double HPE's networking business, and comes as companies increasingly invest in AI-related infrastructure amid an industry-wide boom.