Evercore cuts HPE rating amid 'tougher setup'

Investing.com -- Evercore ISI cut its rating for Hewlett Packard Enterprise to In Line from Outperform on Monday following a sharp rally in the shares, keeping its $65 price target on the stock.

The firm said the move reflects the stock's recent run, with HPE closing at $62.08 on Sept. 11, up 158.5% for the year against an 11.9% gain for the S&P 500.

Trading at 13 times fiscal 2027 earnings, versus a five-year average of eight times, "we believe shares are fairly valued at current levels," the firm’s analysts wrote.

Evercore views the re-rating as justified and fundamental, crediting management for solid execution, particularly through the first year of its Juniper Networks integration.

But it sees fewer near-term catalysts to drive another leg of multiple expansion, especially as upside to profitability depends on improved networking supply.

Networking accounts for more than half of segment operating profit, and while orders grew 36% in the July quarter, pro forma revenue rose 10%, lagging Cisco and Arista.

The firm flagged three catalysts it would watch to get more constructive. These include progress on the Juniper integration and networking margins, mix and margin quality, and tailwinds from its Helios opportunity, which it sees as more of a late fiscal 2027 and 2028 event.

"From here, however, we see a tougher setup," Evercore wrote, adding that with risk/reward more balanced, it was "moving to the sidelines."

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