Hewlett Packard Enterprise (HPE) shares rose more than 3% in premarket trading on Thursday after Morgan Stanley upgraded the stock to overweight from equal weight.

The investment bank also raised its price target by $6 to $28, implying a potential 33% upside from Wednesday’s close.

The upgrade follows a period of strong performance for HPE, with shares advancing roughly 20% in the past three months.

Much of that momentum has been attributed to the company’s completed acquisition of Juniper Networks in early July, a deal that Morgan Stanley believes will reshape HPE’s earnings profile and long-term growth trajectory.

Networking and AI exposure seen as key drivers

Analyst Erik Woodring, who authored the Thursday note, laid out a bullish thesis tied to HPE’s evolving business mix.

According to Woodring, nearly half of HPE’s operations now stem from networking, with added exposure to artificial intelligence through Juniper’s integration into xAI clusters.

“Our thesis is straightforward – with the closure of JNPR, we see 18% upside to FY26 Consensus EPS, with EPS growing to $2.70–3.00 in FY27,” Woodring wrote.

He added that as investors gain a clearer understanding of the company’s increased networking and AI positioning, HPE’s valuation multiple could move above its current 8x level.

The analyst also pointed out that HPE remains one of the most attractively valued names in its sector, trading at 8.5 times Morgan Stanley’s forecast for FY26 earnings.

With AI-related expectations still modest, Woodring sees scope for stronger re-rating as market confidence improves.

Upcoming results as catalyst

Looking ahead, Morgan Stanley expects HPE’s near-term performance to be supported by its upcoming third-quarter results, scheduled for release after the bell on September 3.

Woodring noted that while overall hardware spending growth is projected to decelerate in the second half of the year, HPE’s networking and AI exposure provides resilience compared with peers.

“We believe the July quarter setup is most favorable for OW-rated HPE, as the stock remains the cheapest of the group … and management should guide October quarter results decently ahead of Consensus, which is yet to incorporate the JNPR acquisition,” he wrote.

Beyond earnings, Woodring highlighted HPE’s October analyst day as the most important upcoming catalyst.

The event is expected to include long-term forecasts that could “help the market more clearly appreciate HPE’s future earnings/cash flow power.”

Wall Street remains divided on HPE

Despite Morgan Stanley’s upgrade, Wall Street opinion on HPE remains split.

Of the 20 analysts covering the stock, 10 have a strong buy or buy rating, while the other half maintain a hold rating, according to LSEG data.

The divergence reflects both optimism around the Juniper acquisition and continued caution over broader industry headwinds, including slowing hardware spending.

For now, however, the stock is gaining momentum as investors weigh its valuation discount against the potential upside from networking and AI-driven growth.

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