Hewlett Packard Enterprise Shares Plummet 8% on Downgrade to In Line

Hewlett Packard Enterprise (HPE) shares declined by 8% on Monday after Evercore ISI downgraded its rating from Outperform to In Line. The brokerage cited HPE's recent sharp rally and more balanced risk-reward profile as reasons for the downgrade.

Evercore analyst Amit Daryanani noted that the stock had risen 158.5% year-to-date, compared to an 11.9% gain for the S&P 500. HPE shares were trading at 13 times projected fiscal 2027 earnings, which is higher than its five-year average of eight times.

Daryanani said that while the company's recent re-rating was supported by fundamental improvements, such as strong execution during the integration of Juniper Networks, the setup could become more difficult from this point. He identified three potential catalysts for future growth: continued progress in integrating Juniper Networks, improvement in business mix and margin quality, and benefits from HPE's Helios opportunity.

Networking remains a key area of focus for HPE's profitability, accounting for more than half of segment operating profit. Despite a 36% increase in networking orders in the July quarter, pro forma revenue only rose 10%, trailing the growth reported by Cisco and Arista.