Barclays downgrades HPE after 186% rally, cuts price target to $77

Barclays downgraded HP Enterprise (HPE) to Equal Weight from Overweight on Wednesday, slashing its price target to $77 from $83. Analyst Tim Long attributed the downgrade to the roughly 186% year-to-date rally, arguing it leaves less room for further upside. Long maintained his financial forecasts, viewing the downgrade as a valuation call rather than a reassessment of HPE's fundamentals.

HPE's improved mix, driven by its growing networking business following the acquisition of Juniper Networks, was reflected in the current valuation, according to Long. Barclays now values HPE at 13 times its fiscal 2028 earnings estimate, down from 14 times previously. The networking division, which accounts for roughly half of HPE's operating profit, has been a key driver of the stock's outperformance, with revenue expected to grow at a compound annual rate of high teens over fiscal 2026-2029.

Long highlighted the division's broad-based strength and improving AI outlook, noting HPE and Juniper's positions in campus networking and AI infrastructure markets. However, Barclays sees less upside as memory prices for HPE's server and storage business normalize, potentially weighing on the segment's growth and profitability.

Despite the lower price target, Barclays' $77 valuation remains above the current share price, indicating some upside but a less compelling risk-reward profile compared to before.