Hewlett Packard Enterprise (HPE) stock rose more than 4% on Monday after Morgan Stanley upgraded the company, citing continued strength in enterprise AI infrastructure spending. Morgan Stanley analyst Erik Woodring upgraded HPE to Overweight from Equal-Weight and raised the price target to $71 from $69, implying nearly 30% upside from recent levels.
HPE has been a standout performer, with its stock surging 130% this year and 169% over the past 12 months. Despite this rally, Woodring noted that the stock trades at just 14.3 times forward earnings, well below the S&P 500's multiple of around 20 times, providing an attractive entry point for AI infrastructure exposure.
The bullish case was reinforced by HPE's strong fiscal second-quarter results. Revenue jumped 40% year-over-year to $10.68 billion, while non-GAAP earnings per share soared 108% to $0.79. Networking revenue was a particular highlight, surging 148.2% to $2.7 billion, driven by the integration of Juniper Networks and demand for data-center networking equipment. CEO Antonio Neri has pointed to ongoing customer investment in AI scaling and infrastructure modernization as key drivers.
For the full fiscal year 2026, HPE raised its adjusted earnings guidance to $3.35–$3.45 per share and expects at least $3.5 billion in free cash flow. Analysts at Morningstar also maintain a positive outlook, forecasting that HPE's AI-optimized server business could generate $10 billion in revenue by 2028, with solid growth in general-purpose servers and networking. While risks remain after such a strong run-up, robust AI spending trends and favorable pricing power appear to support further upside.
