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Hewlett Packard Enterprise (HPE, Financials) received an upgrade to Outperform from Evercore ISI, which also raised its price target to $22, reflecting a stronger long-term outlook tied to valuation metrics and multiple growth scenarios.HPE is currently trading at a price-to-earnings ratio of 8.26 and a price-to-book ratio of 0.91, figures that suggest undervaluation. Analyst Amit Daryanani presented several scenarios that could drive HPE's stock higher. A successful completion of the Juniper Networks (JNPR, Financials) acquisition could generate cost synergies and lift the stock to around $24.
In a scenario where the Juniper deal does not close, improved operating margins could support a stock price between $26 and $31. If HPE proceeds with no major changes, the stock is projected to remain stable, with support levels between $15 and $16. A separate sum-of-the-parts valuation based on HPE's networking and storage segments implies a potential value range of $25 to $30.
In its latest quarterly results, HPE reported revenue of $7.85 billion, beating expectations. Earnings per share for the quarter were $0.49. The company also announced a workforce reduction of 2,500 positions as part of a cost-saving initiative.
Strategically, HPE is continuing with the Juniper acquisition process, with a trial involving the U.S. Department of Justice scheduled for July. It also launched new AI server solutions in partnership with Nvidia (NVDA, Financials), incorporating the latest Blackwell architecture to expand its enterprise AI offerings.
This article first appeared on GuruFocus.