Shares of HP Enterprise (NYSE:HPE) gained at the time of writing after investment firm Morgan Stanley upgraded it from Sell to Hold. Analysts led by Meta Marshall told investors that given the current hardware market cycle and the longer-term AI opportunity, they see little reason for further multiple compression.
“While we still believe HPE’s estimates have some room for further downward revisions, particularly on Intelligent Edge, we think this potential is outweighed by investor enthusiasm about potential AI server upside,” the analysts told investors.
However, the analysts cautioned that the outlook may be too optimistic if hardware weakness continues longer than predicted or the “AI servers story gets pushed out.”
It’s worth noting that today’s upgrade follows Morgan Stanley’s bearish outlook from yesterday on HP Enterprise. As pointed out by Marshall, the Sell rating was based on insufficient visibility into HPE’s business and near-term macro clouds.
Is HPE Stock a Good Buy?
With four Buy and seven Hold recommendations, HPE stock has a Moderate Buy consensus rating on TipRanks. After a 7% increase in its share price this year, the average HPE price target of $18.20 per share implies 8.4% upside potential.
