On Friday, Citi upgraded HP (NYSE:HPQ) Enterprise (NYSE:HPE) from Neutral to Buy, increasing the price target to $26.00, up from the previous $23.00. The firm anticipates HP Enterprise will gain from heightened demand in mainstream server and enterprise networking markets.
Additionally, the company, currently valued at $28.12 billion, is expected to see growth in enterprise artificial intelligence (AI) opportunities and a closing valuation gap compared to its peers. This outlook is bolstered by the potential benefits following the acquisition of Juniper Networks (NYSE:JNPR), expected to complete in early 2025.
According to InvestingPro data, HPE's stock is trading near its 52-week high of $22.82, reflecting strong market confidence in its strategic direction.
HP Enterprise's fourth-quarter results surpassed expectations, and the guidance for the first quarter was largely in line with forecasts. While acknowledging that AI orders and revenues can be unpredictable, Citi sees a promising future for HP Enterprise's revenue momentum and margins, driven by enterprise AI and sovereign customer engagements.
InvestingPro analysis shows the company maintains a healthy gross profit margin of 33.9% and has demonstrated strong financial health with an overall score rated as "GOOD." For deeper insights into HPE's financial metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
The analyst also noted the improving demand outlook in core enterprise infrastructure spending. The anticipated earnings per share (EPS) accretion from the Juniper acquisition is another factor contributing to the positive stance. Management's confidence in finalizing the acquisition by early 2025 adds to the constructive view.
The new price target of $26 is based on a price-to-earnings (P/E) multiple of 11 times on the calendar year 2026 estimates. This target still implies a 20% discount to HP Enterprise's peer companies, suggesting room for growth in the stock's valuation.
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