Hewlett Packard Enterprise (NYSE:HPE) received a boost from Evercore on Tuesday as the firm upgraded the stock to Outperform from In Line, highlighting what it described as a compelling risk-reward setup with several potential catalysts for growth.
Evercore also raised its price target for HPE shares from $17 to $22, arguing that downside risk appears limited near $15, while multiple scenarios could push the stock above $25 in the medium term.
The analysts laid out four potential outcomes for HPE, each with different implications for earnings and valuation:
- Juniper Deal Success: If the proposed acquisition of Juniper Networks (NYSE:JNPR) goes through as planned, Evercore believes HPE could capture $300 million in cost synergies within the first year. This, in turn, would drive double-digit earnings growth, with projected earnings per share (EPS) in the $2.25–$2.30 range. Under this scenario, the firm sees HPE shares reaching as high as $24.
- Juniper Deal Fails, Strategic Pivot (“HPE 2.0”): Should the Juniper acquisition fall through, Evercore envisions HPE pivoting toward aggressive margin improvement initiatives across its divisions. If HPE can achieve 20% operating margins in its Hybrid Cloud segment and 30% in Intelligent Edge, EPS could climb to $2.58. The firm also suggested that a $1 billion stock buyback program – funded from existing cash – could reduce the share count by 4% and add approximately $0.11 to EPS. With or without the buyback, this strategic reset could drive shares to $26–$31.
- Juniper Deal Fails, No Strategic Shift (“HPE 1.0”): In a less bullish scenario where the deal collapses and HPE does not alter its operational course, Evercore sees margins remaining flat and the stock likely stuck in a narrow range between $15 and $16. Even so, the analysts noted that downside risk is buffered by HPE’s valuation floor.
- Sum-of-the-Parts Valuation: Finally, applying a sum-of-the-parts analysis using peer-based multiples across HPE’s core businesses, Evercore estimated a potential valuation range of $25–$30 per share.
Summing up the analysis, Evercore emphasized that HPE’s current setup presents a favorable opportunity for investors willing to be patient, with multiple strategic and financial levers that could drive significant shareholder value.