Deutsche Bank Upgrades Hewlett Packard Enterprise

Deutsche Bank upgraded Hewlett Packard Enterprise Co (NYSE:HPE) to "buy" due to its attractive valuation and potential gains from its proposed acquisition of Juniper Networks (NYSE:JNPR). The brokerage has set a price target of $25 on the stock.

Valuation Analysis

HPE is currently trading at:
– 5 times its 2026 enterprise value-to-EBITDA estimates
– 9 times earnings

These figures are significantly lower than its peers in the hardware and networking sectors, as noted by Deutsche Bank (ETR:DBKGn).

Even with the inclusion of Juniper, which is expected to increase HPE's networking profits to over 40% of its total, the stock remains undervalued at:
– 6 times EBITDA
– 8 times EPS

Juniper Acquisition

The $5 billion Juniper deal, anticipated to close in early 2025, will enhance HPE's higher-margin networking business and provide substantial cost synergies. Deutsche Bank expects this deal to:
– Boost earnings and free cash flow per share in the first year
– Deliver double-digit gains in the second year

An analyst commented, “We view the proposed Juniper acquisition positively, given the newfound scale the deal brings HPE in higher-margin networking, alongside sizable cost synergies.”

Standalone Operations

HPE's standalone operations are witnessing improvements, driven by stronger sales in:
– AI
– Servers
– Growth in hybrid cloud and the existing networking segment

Price Targets

Deutsche Bank has set a bullish price target in the mid-$30s, with a downside scenario of around $15, compared to HPE's current level of $20.58.