Analyst Meta Marshall of Morgan Stanley maintained a Buy rating on Hewlett Packard Enterprise (HPE – Research Report), reducing the price target to $24.00.
Meta Marshall has given his Buy rating due to a combination of factors that highlight Hewlett Packard Enterprise’s potential for earnings growth and market position improvement. The anticipated earnings increase, approximately 10% over the coming years, is largely attributed to the potential closing of the Juniper Networks (JNPR) deal, which is expected to enhance HPE’s earnings power significantly, reaching around $2.5. This acquisition would also contribute to a shift in earnings composition, with a larger portion coming from networking, positioning HPE for a gradual expansion of its valuation multiple to about 11 times earnings.
Despite some challenges in the core business, particularly with server margins performing below expectations, the long-term outlook remains positive. The difficulties in server margins were somewhat unexpected, but the company is taking measures to address these issues, including cost-cutting initiatives. The successful completion of the Juniper transaction is seen as crucial for achieving the projected price target, as it would not only provide accretion benefits but also support multiple expansion, reinforcing the Buy rating.
In another report released today, Bank of America Securities also reiterated a Buy rating on the stock with a $20.00 price target.