Mackenzie Tatananni

Shares of Hewlett Packard Enterprise have slumped this year due to disappointing financial results and broader market weakness. However, analysts believe the stock could see explosive gains, with their most optimistic case forecasting 72% upside to the current price.

Evercore ISI analysts upgraded shares of the server and cloud-software company to Outperform from In Line, and lifted the price target to $22 from $17, citing a "fairly attractive" risk-reward balance, "specially for investors that have some duration."

Shares climbed 3.4% to $18.05, on pace for their highest close since March 5, according to Dow Jones Market Data. Futures tracking the S&P 500 and tech-heavy Nasdaq Composite were down 0.3% and 0.4%, respectively.

The Evercore upgrade had much to do with it. In the Tuesday note, analysts presented a handful scenarios showing how the stock price could rise as high as $31 or sink as low as $15.

Investors are waiting for Justice Department to approve HPE's merger with Juniper Networks after moving to block it earlier this year. (Evercore expects "some concessions from HPE" to push the deal through.)

In this upside scenario, the analysts expect HPE to deliver "double-digit [earnings per share] growth" through the first year following the merger, with operational issues also being resolved. In their view, earnings growth could lift the stock to around $24.

If the Juniper deal doesn't pan out, the analysts believe this could drive the stock price even higher. Out of options, HPE might be forced to employ "aggressive cost reduction and optimization efforts" to improve operating margins across both its Hybrid Cloud and Intelligence Edge segments.

"This would effectively provide an 'alternative' path to an activist asking for an excessive/levered buyback," the analysts wrote. Like the first argument, they believe earnings growth could push HPE shares to $26 to $31.

The firm's least-favorable scenario calls for "business as usual," with the deal not closing, and HPE "maintaining the status quo." That would keep the stock range-bound, between $15 and $16, the Evercore team said.

Another news item may have contributed to the stock's ascent on Tuesday. The Evercore upgrade came after HP announced it had fine-tuned its HPE Private Cloud AI, which it co-developed with Nvidia, "to further aid AI developers."

HPE stock ended Monday's session down 1.6%. The year-to-date loss stood at 16%, tamped down by a mix of macroeconomic uncertainty and disappointing financial results.

The stock cratered in March after HPE posted a mixed first-quarter print, including guidance that undershot expectations. Shares are off 26% from a record high of $24.42, set on Jan. 22.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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May 20, 2025 10:29 ET (14:29 GMT)

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