BofA Upgrades Hewlett Packard Enterprise to Buy: AI and Juniper Acquisition Drive Optimism

Hewlett-Packard Enterprise raised to Buy at BofA on several catalysts; shares up By Investing.com

Investing.com -- Analysts at Bank of America (NYSE:BAC) (BofA) hiked their rating on Hewlett Packard Enterprise Co (NYSE:HPE) shares to Buy from Neutral and lifted the price target on the stock to $24 from $21. The company's shares rose roughly 4% in Tuesday's market pre-open. The upgrade reflects BofA's positive outlook on the company's potential for significant cost cuts, a cyclical recovery in its core markets, and revenue and cost synergies from its upcoming acquisition of Juniper Networks Inc (NYSE:JNPR)s. HPE's acquisition of Juniper Networks for approximately $14 billion in cash is expected to close soon, with CEO Neri at the helm. The move is intended to reduce HPE's dependency on compute solutions and enhance its focus on the higher-margin networking business. Despite a challenging networking market, BofA anticipates that cost synergies from the deal will exceed $450 million, with 70% expected to be realized by the end of 2026, contributing to a significant increase in consensus earnings per share (EPS). "We expect additional cost takeouts at core HPE of at least 100bps incrementally, which is also likely conservative," BofA analysts said in a Tuesday note. In its Q3 financial report, HPE showcased AI server revenues of $1.3 billion and a substantial backlog of $3.4 billion. The company also reported an increase in server operating margins quarter over quarter, highlighting a focus on profitability. BofA expects HPE to benefit from its partnership with NVIDIA (NASDAQ:NVDA), leveraging AI computing and capitalizing on Juniper's Mist platform in the networking market. "With decades of expertise in liquid cooling (CRAY systems) and increased adoption of supercomputing, HPE will be able to command a key position in AI adoption at Enterprise and Sovereign," analysts continued. HPE's stock is currently trading at approximately 8x the estimated 2025 consensus EPS, which is at the lower end of its historical range of 6 to 13x. While acknowledging the risks of execution challenges and increased leverage, particularly in a recession scenario, BofA's price objective of $24 is based on a 10 times multiple of the projected 2026 pro-forma EPS of $2.40.

BofA upgrades HPE stock to Buy rating, increases price target By Investing.com

BofA Securities has adjusted its stance on shares of HP Enterprise (NYSE: HPE), shifting from a Neutral rating to a Buy with a new price target set at $24.00, up from the previous $21.00. The revision comes as the firm sees multiple opportunities for the company, including significant cost reductions and a cyclical recovery in various segments. The upgrade is partly attributed to the new Chief Financial Officer, Marie Myers, whose successful track record at HP Inc (NYSE:HPQ). is expected to drive substantial cost cuts at HP Enterprise. BofA Securities also anticipates a cyclical recovery across HP Enterprise's servers, storage, and particularly networking sectors. Additionally, the firm foresees revenue and increased cost synergies following the upcoming acquisition of Juniper, which is expected to contribute positively to HP Enterprise's financials. The High Performance Compute (HPC) segment is also projected to see margin recovery from previously depressed levels. The analyst highlights HP Enterprise as a potential beneficiary of the growing demand in Enterprise and Sovereign markets for Artificial Intelligence (AI) solutions. The new price objective of $24 is based on a 10 times multiple of the projected pro-forma EPS of $2.40 for the calendar year 2026. In other recent news, Hewlett Packard Enterprise Co (NYSE:HPE) has reported a 10% year-over-year increase in third-quarter fiscal year 2024 revenue, reaching $7.7 billion. The company's AI system revenues reached $1.3 billion, marking a 40% increase from the previous quarter. However, the Hybrid Cloud and Intelligent Edge segments saw year-over-year revenue declines of 7% and 23% respectively. HPE has also provided new financial details related to its merger with Juniper Networks (NYSE:JNPR), as indicated in a recent SEC Form 8-K filing. The filing details the completion of the merger agreement and includes audited and unaudited financial statements of Juniper, as well as pro forma financial information post-merger. Loop Capital Markets recently adjusted the price target for HPE shares, raising it to $18 from the previous $16, while BofA Securities reduced its price target to $21 from $24. Both firms maintained a neutral rating on the stock. These adjustments come amid recent developments such as HPE's acquisition of Juniper Networks and the sale of part of its equity in H3C. As HP Enterprise (NYSE:HPE) garners a more optimistic outlook from BofA Securities, InvestingPro data further enriches the narrative surrounding the company's financial health and market position. With a market capitalization of $22.38 billion, HPE is trading at a P/E ratio of 12.18, which is considered low relative to its near-term earnings growth. This is supported by an adjusted P/E ratio for the last twelve months as of Q3 2024 at 10.93, indicating a potentially undervalued stock, especially when paired with the company's strong free cash flow yield as implied by its valuation. InvestingPro Tips highlight HPE's prominence in the Technology Hardware, Storage & Peripherals industry, coupled with its consistent dividend payments over the past decade, illustrating a commitment to shareholder returns. The company's profitability over the last twelve months and analysts' predictions of continued profitability this year reinforce the company's stable financial status. It's worth noting that while some analysts have revised their earnings downwards for the upcoming period, the overall financial data suggests resilience. For those seeking deeper insights, there are additional InvestingPro Tips available, which can provide further guidance on HPE's performance and potential investment opportunities. Readers interested in exploring these tips can find them on the InvestingPro platform.

Hewlett Packard Enterprise Analyst Turns Bullish: 5 Reasons Why - Hewlett Packard (NYSE:HPE)

New CFO Marie Myers has a proven track record at HP Inc.The company is also poised for AI-related benefits. Shares of Hewlett Packard Enterprise Co HPE climbed in early trading on Tuesday, along with some other stocks. The company is poised to benefit from cost cuts, Juniper-related synergies and AI optionality, according to Bank of America Securities. Analyst Wamsi Mohan upgraded the rating from Neutral to Buy, while raising the price target from $21 to $24. The Thesis: The Juniper acquisition will lower the company's reliance on compute and "shift focus to the higher margin networking business," Mohan said in the upgrade note. Check out other analyst stock ratings. The analyst mentioned five reasons for the upgrade: Significant cost cuts driven by new CFO Marie Myers, who has a proven track record at HP Inc HPQ Cyclical recovery across servers, storage and networking Increased revenues and cost synergies from the Juniper acquisition, which is expected to close soon Margin recovery in High-Performance Compute (HPC) AI-related benefits, "as Enterprise/Sovereign demand increases" The tech company could leverage its partnership with Nvidia Corp NVDA and "capitalize on Juniper's Mist platform utilizing A.I. in the networking market," he further wrote. Price Action: Hewlett Packard shares spiked 6.09% to $18.28 at the time of publication on Tuesday. Read More: Hewlett Packard Is A 'Very Inexpensive' Stock, Cramer Says Courtesy Hewlett Packard Enterprise Market News and Data brought to you by Benzinga APIs

Hewlett Packard Enterprise Gets Bank of America Upgrade on AI, Cost Cuts

The analysts pointed to HPE's position in the artificial intelligence market and likely cost cuts. Hewlett Packard Enterprise (HPE) shares surged Tuesday after Bank of America upgraded the stock, saying the tech firm has "many catalysts ahead," including benefits from need for more artificial intelligence (AI) products. The bank raised its rating to "buy" from "neutral," and lifted the price target to $24 from $21. Analysts wrote in a note to clients that because of its "decades of expertise in liquid cooling (CRAY systems) and increased adoption of supercomputing, HPE will be able to command a key position in AI adoption" for large organizations and governments. Bank of America also believes that the company will make significant cost cuts under the leadership of new Chief Financial Officer (CFO) Marie Myers, and will see revenue and increased cost synergies with its planned purchase of Juniper Networks (JNPR). HPE announced the $14 billion acquisition of Juniper last January. Other positives cited by the analysts were the "cyclical recovery across servers, storage, and particularly networking," and profit margin recovery for high performance computing. Shares of Hewlett Packard Enterprise, which entered Tuesday up just 1.5% on the year, rose 5% to $18.09 in early afternoon trading.