Goldman Sachs Upgrades Hewlett Packard Enterprise, Citing Strategic Shift

Hewlett Packard Enterprise US42824C1099

Goldman Sachs has issued a bullish upgrade for Hewlett Packard Enterprise (HPE), shifting its rating to "Buy" and raising its price target to $31.00 from $28.00. The investment bank's optimism centers on HPE's transformative acquisition of Juniper Networks and the resulting strategic pivot toward a more networking-centric business model.

The core of Goldman's upgraded assessment lies in a revised financial projection. Analysts now forecast that the networking segment will contribute approximately 50% of the company's operating income (EBIT) by fiscal year 2026. On a pro forma basis, they project roughly 6% revenue growth for the period spanning 2025 to 2028. This growth is expected to be accompanied by an expansion of operating margins by more than 250 basis points, driven by the altered portfolio mix, and mid-single-digit compound annual growth in earnings per share (EPS).

Institutional Positioning Reflects Diverging Views

Recent regulatory filings reveal a mixed picture of institutional sentiment. While overall ownership remains concentrated, with institutions and hedge funds holding about 80.78% of shares, individual moves varied significantly last quarter. Nordea Investment Management reduced its stake by 9.7%, selling 772,819 shares, to hold a remaining position of 7,172,952 shares valued at approximately $173.3 million.

Conversely, other major investors substantially increased their exposure. Empowered Funds boosted its holdings by 317.3%, adding 113,906 shares, and the Czech National Bank raised its position by 6.4%, acquiring an additional 19,415 shares. These contrasting actions suggest some investors are taking profits while others are building positions aligned with the networking and artificial intelligence growth narrative.

Recent Performance and Forward Guidance

HPE's latest quarterly report (Q4 FY2025) presented a blend of challenges and strengths. Revenue of $9.7 billion fell short of the consensus estimate of $9.91 billion. Management attributed this primarily to delays in AI server orders related to government-sponsored AI initiatives. However, adjusted earnings per share of $0.62 surpassed analyst expectations of $0.59.

Looking ahead, the company's guidance for fiscal year 2026 sets an EPS target range of $2.25 to $2.45. For the first quarter, HPE anticipates EPS between $0.57 and $0.61. In a separate capital allocation move, the board has increased the quarterly dividend, which now annualizes to $0.57 per share, offering a yield of around 2.6%. The next payment is scheduled for January 16.

Product Strategy Underpins the Thesis

Recent product launches support Goldman's positive thesis. At the NRF 2026 conference, HPE showcased new retail and AI infrastructure solutions, featuring autonomous capabilities within its Aruba switches and AI-native retail analytics platforms. A key strategic initiative is the integration of Juniper's Mist AI technology into the Aruba portfolio, which is designed to simplify operations and solidify networking as a higher-growth, higher-margin pillar for the business.

Key Risks and Market Context

The realization of Goldman's upbeat forecast hinges on two critical conditions. First, HPE must successfully integrate Juniper and achieve the projected margin improvements from the new portfolio mix. Second, a normalization in the timing of AI server orders is required. Fulfillment of both would support the upward trajectory, while further delays or integration issues could moderate the recovery.

In current market trading, HPE shares are priced at $22.29. The broader analyst consensus remains more cautious, with a "Hold" rating and an average price target of $25.53, notably below Goldman Sachs's $31.00 target.