Hewlett Packard Enterprise Co. (NYSE:HPE) shares are climbing Monday after Morgan Stanley elevated its view on the enterprise technology company to Overweight from Equal-Weight. Here’s what you should know.

Morgan Stanley Picks HPE as Top OEM for Enterprise Cycle

Analyst Erik Woodring moved his rating to Overweight from Equal-Weight Monday and set a price objective of $69, trimmed slightly from the prior $71, a level that puts roughly 30% of potential appreciation on the table from where shares are currently trading. Woodring placed HPE above all peers in his OEM group for exposure to the enterprise infrastructure spending cycle, describing the stock’s current setup as one where the potential gains far outweigh the downside.

Research across the enterprise infrastructure landscape continues to point toward demand strength spanning servers, storage and networking, and HPE sits at the center of all three. Channel checks, conversations with chief information officers and direct management dialogue all point to a competitive position that has strengthened materially since the Juniper deal was completed, with the integration now moving past the distraction phase and beginning to generate real business benefits.

Financial Momentum Adds to the Bull Case

The operational progress is accompanied by improving financial dynamics. Cash generation is converting more efficiently into free cash flow, debt reduction is running ahead of schedule and the company’s ability to return money to shareholders is expanding.

Woodring said the stock’s retreat from the gains it made following its most recent earnings report has opened a window that undervalues what the business is actually capable of earning. He placed HPE at the top of his enterprise infrastructure OEM group on the basis of earnings upside potential, valuation support and the probability of a meaningful re-rating.

Execution is the single risk he flagged, as the case for owning the stock depends on the company continuing to deliver against its commitments.

HPE Shares Are Moving Higher

HPE Price Action: Hewlett Packard shares were up 4.62% at $55.68 at the time of publication on Monday, according to Benzinga Pro.

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