HPE valuation under pressure: What’s behind the stock selloff?

Hewlett Packard Enterprise shares fell sharply on September 14 after Evercore ISI downgraded the stock from Outperform to In Line. The selloff came after HPE had gained nearly 159% in 2026, making it one of the year's strongest technology performers.

Evercore's downgrade was primarily valuation-driven rather than a change in its view of HPE's underlying business. The brokerage retained its $65 price target but said the stock had already reflected much of the expected improvement following its powerful rally.

HPE was trading at around 13 times fiscal 2027 earnings, compared with its five-year average of about 8 times, according to Evercore. The brokerage argued that the valuation now leaves less room for further multiple expansion without stronger earnings or new catalysts.

Despite the downgrade, HPE continues to benefit from strong demand for AI infrastructure and networking equipment. The company has raised its 2027 outlook, while networking orders grew 36% in the July quarter. However, supply constraints and lower networking margins remain important risks.

Evercore sees fewer near-term catalysts capable of driving another major leg higher. Investors will be watching the Juniper Networks integration, networking margins, product mix and margin quality, while HPE's Helios opportunity is viewed as a more significant catalyst for late fiscal 2027 and 2028.

The selloff does not necessarily signal a deterioration in HPE's AI business. Instead, it highlights the challenge of sustaining a huge rally after valuations have expanded rapidly. The key question now is whether earnings growth can catch up with the stock's earlier gains. Broader weakness in AI and semiconductor stocks also added pressure to HPE on Monday.