Investing.com -- Morgan Stanley upgraded Hewlett Packard Enterprise (NYSE:HPE) to Overweight from Equal Weight Thursday, citing the pending Juniper Networks (NYSE:JNPR) acquisition as a key driver of near-term upside.

The investment bank's analysts highlight the deal's potential to unlock earnings growth and improve valuation multiples, positioning HPE for an attractive risk-reward setup.

The acquisition, viewed as a catalyst for re-rating the stock, could drive "upwards of 40-50% of pro forma earnings power" through networking contributions.

Morgan Stanley (NYSE:MS) notes this could help HPE achieve a blended multiple of 12x, compared to its historical 8x multiple.

"We see ~30% upside to our price target," analysts wrote, raising the target to $28 from $23 a share.

The report highlights Juniper's return from inventory digestion and new cloud customers as positives, along with HPE's solid core enterprise performance.

Morgan Stanley says risks include potential delays in closing the deal and challenges integrating the portfolios, but analysts believe these are factored into their valuation.

The bank estimates ~$2.50 of earnings power by FY26, accounting for synergies and associated costs.

They add that long-term success hinges on effectively leveraging Juniper's technology in HPE's enterprise channel while maintaining support for HPE's native networking business.

Despite lingering uncertainties, the bank remains optimistic about the deal's potential to solidify HPE's position across campus and data center solutions. With macroeconomic conditions stabilizing, Morgan Stanley views HPE as a compelling buy for investors seeking exposure to enterprise AI and networking growth.

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