Morgan Stanley Upgrades HPE to Overweight Due to Juniper Acquisition

Morgan Stanley upgraded Hewlett Packard Enterprise (HPE) to Overweight from Neutral, citing the Juniper acquisition as a driver for enterprise hardware and storage demand due to artificial intelligence. HPE shares rose 3% in early trading.

Morgan Stanley has upgraded Hewlett Packard Enterprise (HPE) to Overweight from Neutral, citing the potential growth in the artificial intelligence (AI) and networking sectors following the Juniper Networks acquisition. The upgrade comes as the tech services company aims to capitalize on the growing demand for AI-related hardware and services. Morgan Stanley's analysts believe that the Juniper acquisition will significantly boost HPE's presence in the networking sector and increase its exposure to AI technologies.

The upgrade is supported by Morgan Stanley's projections, which suggest an 18% upside to HPE's fiscal year 2026 consensus earnings per share (EPS), with EPS projected to grow to $2.70-3.00 in fiscal year 2027 [1]. The firm expects that as the market better understands HPE's increased focus on networking and AI, the company's valuation multiple could expand beyond its current 8x multiple.

Several potential catalysts could drive HPE's stock performance in the near term, including the company's third-quarter results scheduled for September 3, which are expected to be a positive catalyst [1]. Additionally, the company's analyst day in October is viewed as the most important upcoming catalyst, where HPE is expected to provide longer-term forecasts, helping the market appreciate the company's future earnings and cash flow potential [1].

The upgrade is part of a broader optimism about the tech hardware sector. Morgan Stanley also increased price targets for other companies in the space, including Dell Technologies and NetApp, indicating a generally positive outlook for enterprise technology spending, particularly in AI and networking-related areas [1].

While Morgan Stanley and some other analysts maintain a bullish view, with 10 out of 20 analysts giving a strong buy or buy rating, the remaining 10 have a hold rating [1]. HPE's shares jumped about 3% in premarket trading on Thursday following the upgrade, reflecting the market's initial reaction to the positive news.

References:
[1] https://theoutpost.ai/news-story/morgan-stanley-upgrades-hewlett-packard-enterprise-on-ai-and-networking-potential-19381/
[2] https://stocktwits.com/news-articles/markets/equity/morgan-stanley-believes-hpe-is-undervalued/chsSysvRdih
[3] https://www.ainvest.com/news/morgan-stanley-upgrades-hpe-overweight-juniper-acquisition-benefits-ai-demand-2508/
[4] https://www.investing.com/news/stock-market-news/ms-upgrades-hpe-as-enterprise-hardware-demand-holds-up-4205087