HPE Stock Jumps After Morgan Stanley Upgrade — Analyst Admits ‘We’ve Been On The Wrong Side’ Of The Enterprise Hardware Trade

Morgan Stanley also upgraded its broader U.S. IT Hardware industry view to In-Line from Cautious, citing evidence that the current hardware cycle is being driven by refreshes, pull-forwards and AI demand.

• Morgan Stanley upgraded HPE to ‘Overweight’ from ‘Equal Weight’, while lowering the price target to $69 from $71, which still implies an upside potential of about 30% from Friday’s closing price.
• The firm previously expected record component inflation to quickly weigh on a recovery in hardware spending.
• It added that the latest AlphaWise survey has changed that view, pointing to a combination of hardware refreshes, spending pull-forwards and AI demand driving the current cycle.

Shares of Hewlett Packard Enterprise Co. (HPE) edged higher on Monday after Morgan Stanley upgraded the stock, signaling a more constructive view on the enterprise hardware market.

According to TheFly, the firm also upgraded its broader U.S. IT hardware industry view to In-Line from Cautious, citing evidence that the current hardware cycle is being driven by refreshes, pull-forwards and AI demand.

Hewlett Packard Enterprise shares were up more than 6% in Monday’s pre-market trade. HPE was among the top trending tickers on Stocktwits at the time of writing.

Morgan Stanley Admits It Got The Hardware Trade Wrong

Morgan Stanley upgraded HPE to ‘Overweight’ from ‘Equal Weight’, with a $69 price target, down from $71, implying an upside potential of about 30% from Friday’s closing price. The firm acknowledged that its previous view on the enterprise hardware market had been too cautious.

“We admit to having been on the wrong side of the enterprise hardware trade,” the analyst wrote, after previously expecting record component inflation to quickly weigh on a recovery in hardware spending.

But the firm’s latest AlphaWise survey has changed that view, pointing to a combination of hardware refreshes, spending pull-forwards and AI demand driving the current cycle.

AI Is Making The Hardware Upcycle Last Longer

Morgan Stanley now sees the hardware recovery as more durable than previously expected, describing it as “a longer but still predominantly cyclical infrastructure upcycle.”

The survey points to demand being supported by multiple factors, including refreshes and pull-forwards alongside AI spending.

Morgan Stanley is also shifting its preferences within IT hardware, favoring storage over servers and PCs as it reassesses where spending is likely to remain strongest.

Morningstar Sees More Upside For HPE

Morningstar forecasts HPE’s AI-optimized server business to reach roughly $10 billion by 2028 and expects general-purpose server revenue to compound at 16% over the next three years. It also projects networking revenue to grow at a 30% CAGR through 2028, with normalized margins of 27%.

The firm sees further upside if HPE can accelerate its AI-driven growth, noting that its fair value could reach $70 if the market gives the company more credit for its growth and $80 or more if HPE continues its accelerated AI-driven growth.

What Retail Traders Think Of HPE Stock

Retail sentiment on Stocktwits around Hewlett Packard Enterprise trended in the ‘bullish’ territory, with message volumes at ‘high’ levels at the time of writing.

HPE stock is up 122% year-to-date and 161% over the past 12 months. The S&P 500 ETF (SPY) is up 22% over the past 12 months, while the Vanguard Morningstar Total Stock Market ETF (VTI) is up 23%.

The iShares Core S&P 500 ETF (IVV) is up 22% during this period, while the Vanguard Morningstar Mid-Cap ETF (VO) is up 16%.

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