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Investing.com -- JP Morgan upgraded Hewlett Packard Enterprise (NYSE:HPE) to Overweight with a price target of $30 given a stronger earnings visibility and upside potential following the completion of its Juniper Networks (NYSE:JNPR) acquisition.
The brokerage said the $14 billion Juniper deal strengthens HPE’s position in the fast-growing networking segment, shifting the company toward higher-margin and less cyclical revenue streams.
HPE now holds leadership positions in campus switching, wireless LAN, and enterprise data center switching.
JPMorgan expects earnings to rise to $2.70 per share by fiscal 2027, supported by accelerating revenue growth, improved margins, and cost synergies from the Juniper deal.
Networking is expected to account for more than half of HPE’s profits by then, up from 35% in fiscal 2024.
While the firm sees a bull-case valuation of over $35 per share, it is applying a more conservative 11-times multiple on FY27 earnings to arrive at its $30 target, citing near-term execution risks around integration and recent softness in HPE’s server business.
JP Morgan said investors may take time to warm up to the re-rating case but highlighted potential upside if integration progresses smoothly or financial performance exceeds expectations.
“We rate shares of HPE at an Overweight, given its solid position across servers, storage, and networking — the latter of which has been bolstered by the acquisition of Juniper, increasing its mix of higher-margin, less cyclical revenue relative to broader IT hardware equipment,” analysts at JP Morgan said.
“We see this as not only providing further headroom for upside relative to revenue and earnings growth over the coming years, particularly with the latter further reinforced by sizable cost synergies.”