Evercore ISI sees a few paths through which Hewlett Packard Enterprise can unlock sharp gains ahead. Analyst Amit Daryanani upgraded the cloud technology company to outperform from in line. He also lifted his price target by $5 to $22, which suggests 26% potential upside for the battered stock. “We think the current risk/reward is fairly attractive specially for investors that have some duration,” Daryanani said in a note to clients. “We think the probability for upside ($25-30) is more likely while the downside is protected around $15-16.” Shares of HPE are down roughly 18% this year as the company struggles with higher discounting and expected price adjustments that the company said could weigh on its top-line growth. HPE beat fiscal first quarter revenue expectations but issued weak fiscal full-year guidance. Elliott took an approximately $1.5 billion position in HPE in mid-April in an effort to improve shareholder value. Daryanani laid out four scenarios ahead in which HPE could return to growth. First, the analyst said that if HPE’s proposed $14 billion acquisition of Juniper Networks is approved by the Justice Department, the company could see double-digit earnings per share growth in the first year. In the case that the Juniper deal falls through, Daryanani listed a second scenario in which HPE improves segment operating margins in its hybrid cloud and intelligent edge businesses, through cost reduction and optimization. “This would effectively provide an “alternative” path to an activist asking for an excessive/levered buyback,” he said, adding that in this case, the stock could rise as high as $31 per share. The least favorable situation would be if the Juniper deal does not close and HPE maintains its status quo, leaving the stock rangebound with support near the $15 and $16 level, according to Daryanani. The fourth scenario he laid out looks at the potential for HPE to implement strategies to support its networking and storage businesses to unlock more “premium” multiples, leading the stock to be worth as high as $30 in this case, he said. “Our base case reflects what we view are fair market multiples, while our bull case reflects further upside in server/storage/networking valuations,” he wrote in the note. HPE 1Y mountain HPE stock performance.
