Morgan Stanley has elevated Hewlett Packard Enterprise's (HPE.US) rating from "Neutral" to "Overweight" while raising the target price from $22 to $28. The upgrade reflects the anticipated benefits from the company's acquisition of Juniper Networks, as enterprise hardware and storage stocks capitalize on expanding artificial intelligence demand.

The Morgan Stanley analyst team, led by Erik Woodring, stated: "Our thesis is straightforward - with the completion of the Juniper Networks acquisition, we anticipate 18% upside potential to fiscal 2026 consensus earnings per share, with fiscal 2027 EPS growth reaching $2.70-3.00. We believe the valuation multiple will be reassessed from the current 8x as the market gradually recognizes that nearly half of Hewlett Packard Enterprise's business stems from networking operations, including increased AI-related activities such as Juniper Networks' applications in xAI clusters."

The investment bank also reaffirmed its "Overweight" rating on Dell (DELL.US), raising the target price from $135 to $144. "We maintain our positive long-term outlook for Dell - the company stands as a clear leading original equipment manufacturer in AI computing, gaining increased market share from key clients like xAI and CoreWeave, recapturing enterprise storage market position, demonstrating solid performance in traditional server segments, and currently positioned in the middle phase of a company-wide cost efficiency program. We expect this to drive EPS growth exceeding 10% over the next three years, surpassing management's target of 8%+," Woodring noted.

Morgan Stanley also initiated coverage of Pure Storage (PSTG.US) and NetApp (NTAP.US), assigning "Neutral" ratings with target prices of $60 and $115, respectively. "Pure Storage's differentiated advantages in performance, total cost of ownership, and simplicity - all software-driven - continue building competitive moats relative to enterprise storage peers and driving sustained market share gains. We expect this trend to persist," Woodring explained. "Additionally, Pure Storage's partnerships with Meta Platforms and CoreWeave demonstrate their foothold in the hyperscale/AI data center space."

Morgan Stanley's latest Chief Information Officer survey indicates increased enterprise hardware spending in the second quarter of 2025. However, beyond AI-focused hyperscale enterprises, overall enterprise hardware expenditure may not show significant growth in upcoming quarters.

"Looking ahead, we anticipate overall hardware growth will decelerate in Q3/Q4, with the slowdown potentially most pronounced in PC segments (benefiting from moderate demand front-loading and Windows 11 updates in the first half) and general-purpose server categories," Woodring stated. "For enterprise storage, we're receiving mixed signals regarding the second half of 2025/2026. On the positive side, we continue hearing that storage demand/growth may accelerate due to data center monetization requirements, as growing on-premises AI spending creates demand for faster, higher-performance, primarily flash-based storage solutions."

Hewlett Packard Enterprise is scheduled to announce its latest quarterly financial results on September 3rd. Market consensus expects adjusted earnings per share of $0.41 and revenue of $8.88 billion.