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Investing.com - Citi has resumed coverage of HP (NYSE:HPQ) Enterprise (NYSE:HPE) with a Buy rating and a $25.00 price target, citing benefits from the company’s Juniper acquisition. Currently trading at $20.51, HPE shows potential upside according to InvestingPro data, with analyst targets ranging from $16 to $30.
The firm had previously suspended its rating on HPE stock but now views the Juniper deal as positioning the company favorably to capitalize on AI, enterprise networking, and edge compute growth drivers, which are estimated to grow at a 7% compound annual growth rate. This strategic positioning appears sound, as HPE has demonstrated strong execution with revenue growth of 11.79% over the last twelve months.
Citi believes the $600 million in operating expense synergies identified by HPE, increased from $450 million previously, should drive 15% earnings per share accretion, supporting $2.51 EPS in fiscal year 2027.
The research firm notes that with approximately 50% of operating income now coming from the higher-margin networking segment, compared to about 35% previously, a price-to-earnings multiple of 10x on fiscal 2024 earnings is warranted, above HPE’s 8x median PE.
Citi also points to potential upside from revenue synergies as Juniper products are integrated into HPE’s global sales channels, along with debt reduction from free cash flow generation in future years.
In other recent news, Hewlett Packard Enterprise completed its approximately $14 billion acquisition of Juniper Networks (NYSE:JNPR), enhancing its position in the enterprise and data center networking markets. Following this acquisition, S&P Global Ratings revised Juniper Networks’ outlook to stable from negative, affirming its ’BBB’ issuer credit rating. In related developments, Hewlett Packard Enterprise announced the appointment of Robert Calderoni, a seasoned technology executive, to its board of directors. Calderoni will also chair a newly established Strategy Committee aimed at assessing business strategies for additional value creation.
This move comes as part of a cooperation agreement with activist investor Elliott Investment Management. On the analyst front, Goldman Sachs has reinstated coverage of Hewlett Packard Enterprise with a Neutral rating and a price target of $22.00. UBS also reiterated its Neutral rating, maintaining an $18.00 price target, while noting increased expected operating expense savings from the Juniper acquisition. These developments highlight Hewlett Packard Enterprise’s strategic moves and analyst perspectives in light of its recent acquisition activities.
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