The second-largest maker of computer networking equipment is now at 52-week highs.
Juniper Network's shares jumped this week after activist hedge fund Elliott Management announced its 6.2% stake in the company and proposed a share buyback program. Elliott, run by billionaire Paul Singer, believes their buyback could raise the share prices to a range between $35 and $45. It closed Wednesday at $25.88.
At the same time, Elliott Management proposed a $3.08 billion takeover of a Juniper rival, Riverbed Technology. That company rejected Elliott's offer of $19 per share and closed Wednesday at $20. Elliott owns 10% of Riverbed already.
CNBC contributor Andrew Busch, editor and publisher of The Busch Update, believes Elliott's offer and recommendations may be too much for Juniper to handle. Elliott has proposed Juniper come up with $200 million in cost elimination and a better capital structure, notes Busch.
"That's a pretty tall order," says Busch on CNBC's Street Sign's Talking Numbers segment. "But then, most importantly for stock investors, they've asked the company – or, recommended – $3.5 billion in share buybacks with $2.5 billion of that occurring right now. The company has only about $2.8 billion of cash on hand. So, this is really an outsized move."
The critical date for Juniper will ultimately be January 23, when the company reports its quarterly results. "The company has said they're going to get 35 to 37 cents per share," says Busch. "If they miss that, it will fall back down."
JC O'Hara, Chief Market Technician at FBN Securities, says investors shouldn't rush in just yet to join Elliott in Juniper.
"Over the last three years, it's been an underperformer," says O'Hara. "Over the last two-and-a-half years, it's basically moved sideways."
O'Hara notes that the stock has traded in a $10 range between $15 and $25. That changed with Elliott's announcement. While the 7.5% jump on Monday may be good for the technicals, O'Hara is concerned because there has been no real change for the company.
"While I do like it for the long-term, short-term a lot of my indicators are overbought," says O'Hara. "I wouldn't rush in for the stock. I would take it nice and steady and see how this plays out. But, I do like it longer-term."
To see more of Busch and O'Hara on what's next for Juniper Networks, watch the video above.
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- Riverbed Technology
- Elliott Management