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Investing.com -- Citi resumed coverage of Hewlett Packard Enterprise (NYSE:HPE) with a Buy rating and $25 price target, citing benefits from its completed acquisition of Juniper Networks (NYSE:JNPR) and an improving earnings mix.
The brokerage said the Juniper deal positions HPE to capture long-term growth in enterprise networking and AI infrastructure, markets it expects to grow at a 7% compound annual rate.
Citi expects operating income from networking to rise to around 50% of HPE’s total, up from about 35% prior to the deal, boosting overall margins.
HPE now targets $600 million in operating expense synergies from the acquisition over three years, up from an earlier $450 million estimate.
Citi forecasts the deal to be 15% accretive to earnings, supporting EPS of $2.51 in fiscal 2027.
While the firm acknowledged integration risks and execution challenges, it noted that the recent formation of a strategy committee, following engagement with activist investor Elliott Management, could help ensure the company meets its financial targets.
Citi said the stock’s valuation remains attractive, trading below its historical average. It assigns a 10x forward P/E multiple to its FY24 estimates, reflecting the improved earnings profile.
Additional upside could come from revenue synergies as Juniper products are integrated into HPE’s global distribution network.