JP Morgan: Acquisition of Juniper Networks, Inc. significantly improves earnings visibility, rating upgraded to "Hold" for Hewlett Packard Enterprise Co. tech (HPE.US).

J.P. Morgan has upgraded the rating of Hewlett Packard Enterprise Co. (HPE.US) to "overweight" with a target price of $30. The bank believes that Hewlett Packard Enterprise Co.'s profit visibility has strengthened after completing the acquisition of Juniper Networks, Inc., and that it has potential for further growth. Analysts led by Sameer Chopra stated that they upgraded their rating on Hewlett Packard Enterprise Co. after the company completed the acquisition of Juniper Networks. This acquisition has enhanced Hewlett Packard Enterprise Co.'s market position, solidifying its place among large networking companies. The company currently holds a leading position in campus switching, wireless LAN, and enterprise data center switching, with a product portfolio that ranks at the forefront of the industry, including switches, wireless access points, routers, and more. J.P. Morgan stated that this acquisition further strengthens Hewlett Packard Enterprise Co.'s network business, providing a higher profit margin and less cyclically affected revenue mix compared to broader IT hardware equipment. J.P. Morgan wrote, "We believe this not only provides further upside potential for Hewlett Packard Enterprise Co.'s revenue and profit growth in the coming years, especially as the latter will be further enhanced by significant cost synergy effects." Analysts noted that with the increasing share of high-margin network business revenue and the release of significant cost synergy effects, Hewlett Packard Enterprise Co. is expected to achieve earnings per share of at least $2.70 in fiscal year 2027, highlighting the stock's significant upside potential. By fiscal year 2027, the network business is expected to account for more than half of the company's profits, higher than the 35% in fiscal year 2024. Although the bank believes that the target price should exceed $35 under an optimistic scenario valuation, they have adopted a more conservative approach by using an 11x price-earnings ratio to calculate earnings for fiscal year 2027, resulting in a target price of $30 due to recent integration execution risks and the softness in Hewlett Packard Enterprise Co.'s server business. However, analysts pointed out that recent market concerns about the company's execution capabilities may lead investors to be more cautious, and they may gradually accept the company's higher price-earnings ratio valuation as they observe progress in key integration milestones. As of the time of writing, Hewlett Packard Enterprise Co. rose by 0.2% in after-hours trading.