Buy this tech services stock as positive catalysts start lining up, says Morgan Stanley

Morgan Stanley upgraded Hewlett Packard Enterprise (HPE) to Overweight from Equal Weight, raising its price target to $28 and implying 33% upside, primarily due to the recently closed Juniper Networks acquisition. The firm anticipates an 18% boost to FY26 consensus EPS and expects HPE's increased networking and AI exposure to re-rate its multiple above the current 8x. This upgrade, which saw HPE shares rise 3% in premarket trading, highlights upcoming Q3 results and an October analyst day as key catalysts for further upside, despite current mixed Wall Street sentiment.

Analysis

Morgan Stanley has upgraded Hewlett Packard Enterprise to Overweight from Equal Weight, raising its price target to $28, which implies a 33% upside. The core of this bullish thesis is the recently closed acquisition of Juniper Networks, which the firm projects will drive an 18% upside to FY26 consensus EPS and grow EPS to a $2.70-$3.00 range in FY27. The rationale is that the acquisition fundamentally shifts HPE's business mix, with nearly half now in networking, including increased exposure to artificial intelligence through Juniper's work with xAI. This shift is expected to trigger a valuation multiple re-rating from its current 8x level. The stock has already appreciated approximately 20% over the past three months and rose 3% in premarket trading on the upgrade. Two key near-term catalysts are identified: the Q3 results on September 3, where guidance is expected to be ahead of a consensus that has not yet incorporated the acquisition, and the October analyst day, which could provide validating long-term forecasts. Despite this positive view, Wall Street remains divided, as LSEG data indicates that of 20 analysts, 10 rate the stock a buy while the other 10 have a hold rating.

Key Decisions for Investors

• Investors should evaluate the potential for a significant re-rating of HPE's valuation multiple, currently at 8x, based on the thesis that the Juniper Networks acquisition will substantially increase its earnings power and exposure to high-growth networking and AI markets.
• Closely monitor the company's Q3 earnings release on September 3 and its October analyst day, as positive guidance and long-term forecasts from these events are cited as the primary near-term catalysts for further stock appreciation.
• While the analyst outlook is strongly positive, consider the existing split sentiment on Wall Street, where half of the analysts tracked maintain a hold rating, suggesting the market has not yet reached a consensus on the post-acquisition growth story.