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Why Hewlett Packard Enterprise Shares Popped 14% Last Month

By Chris Neiger - Updated Feb 13, 2018 at 2:26PM

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Tax reform and an analyst upgrade did the trick.

What happened

Shares of Hewlett Packard Enterprise Company (HPE 4.64%) jumped 14.2% in January, according to data provided by S&P Global Market Intelligence, after a positive investor note from Morgan Stanley, which included an upgrade rating from overweight to equal weight.

So what

Investors were pleased to hear Morgan Stanley's Katy Huberty say that Hewlett Packard Enterprise could see earnings and revenue growth due to increased spending in the coming years. Huberty believes that recent tax reform changes for companies in the U.S. will free up cash for Hewlett, which it will then use for more information technology spending.

Person holding smartphone with stock graph on it, and stock graph in the background.

Image source: Getty Images.

"In light of enterprises underspending on IT over the past two decades and the related degradation in US productivity growth, we see a bull case of several years of stronger enterprise IT growth," Huberty wrote.

Huberty also increased her price target for the company from $14 to $19, which helped improve investor sentiment for Hewlett Packard's stock.

Now what

Investors haven't been as optimistic for Hewlett Packard this month, but that might have more to do with volatility in the overall stock market. Hewlett's stock has fallen about 8% in February, but has dropped in near lockstep with the S&P 500, which is down about 6% this month.

HPE Chart

HPE data by YCharts

The company reports its fiscal first-quarter 2018 results next week, but investors will likely have to wait several quarters to see if Huberty's estimates of increased spending -- and resulting revenue and earnings gains -- pan out.

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