Evercore upgrades HPE to Outperform on attractive risk-reward profile

Investing.com -- Evercore raised its rating Hewlett Packard Enterprise (NYSE:HPE) shares to Outperform from In Line, citing what it sees as a favorable risk-reward setup with potential for significant upside.

The broker also lifted its target price to $22 from $17, noting the stock offers downside protection around $15 while multiple scenarios could drive it above $25.

The analysts outlined four possible paths for HPE. The first assumes the Juniper Networks (NYSE:JNPR) deal closes as expected. In this case, HPE could realize $300 million in cost synergies in year one, leading to double-digit EPS growth. Evercore projects EPS of $2.25–$2.30 and sees the stock reaching $24.

In the second scenario, the Juniper deal falls through but HPE initiates significant cost and margin improvements across its segments—what Evercore dubs “HPE 2.0.” If HPE achieves 20% operating margins in Hybrid Cloud and 30% in Intelligent Edge, EPS could rise to $2.58.

“In addition, HPE could also use some of its cash on hand to deploy a large buyback program, which we believe investors want from the company if the Juniper transaction doesn’t go through,” Evercore analysts said in a note.

“An incremental $1B buyback program alone in FY26 could reduce HPE’s overall share count by 4% or drive an additional 11c of EPS upside by our estimate,” they added.

Even without that, Evercore believes the stock could trade at $26–$31.

The third scenario is less constructive. If the Juniper deal fails and HPE maintains the status quo—“HPE 1.0”—Evercore expects margins to remain flat and the stock to stay rangebound at $15–$16, supported by trough valuation levels.

In the fourth and last scenario, Evercore applied a sum-of-the-parts (SOTP) analysis. Using peer-based multiples across HPE’s segments, the valuation yielded a share price range of $25–$30.

Overall, the broker sees the current risk-reward profile for HPE stock as “favorable, with multiple pathways to upside if investors have the duration.”