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Morgan Stanley Upgrades HP Enterprise Amid Juniper Acquisition.

Juniper

Business Honor
05 December, 2024

Morgan Stanley upgrades HP Enterprise, citing Juniper Networks acquisition boosting earnings and growth potential.

Morgan Stanley recently upgraded HP Enterprise (HPE) stock from Equalweight to Overweight, raising its price target from $23.00 to $28.00. This upgrade comes as HP Enterprise moves closer to finalizing its acquisition of Juniper Networks, a significant step that could substantially boost HPE's earnings, particularly from its networking segment, which is expected to contribute 40-50% of the combined company's pro forma earnings.

Juniper Networks, a global leader in high-performance networking products and services, will add an impressive layer of capability to the portfolio of HP Enterprise, taking it further toward AI-driven networking solutions and cloud services. Expected to be concluded shortly, this acquisition will further offer HPE new growth paths and a strong competitive advantage as the tech space continues to rapidly evolve. The combination is likely to also cause a revaluation of HPE's stock. Analysts project a new valuation multiple of 12 times earnings, as against the traditional 8 times for HPE.

Juniper's recent performance, which includes emerging from an inventory digestion phase and securing new cloud customers, has further fueled optimism about the company's short-term growth prospects. These positive developments may lead to revised earnings forecasts, contrasting with the more conservative estimates currently held by Wall Street analysts.

Despite the integration risks that might occur with the introduction of Juniper into HPE, including overlapping portfolios and waiting for customer orders to settle upon the confirmation of the deal, Morgan Stanley has reason to believe that there will be enough strong momentum from the core business at Juniper with its new, innovative technologies, which should blend well into HPE's strategy for a continuing successful stint in networking and AI-driven business segments.