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HP Enterprise stock upgraded to buy, price target on robust positioning

EditorNatashya Angelica
Published 06/07/2024, 03:47 PM

On Friday, HP (NYSE:HPQ) Enterprise (NYSE:HPE) received an upgrade from a Hold to a Buy rating by a research analyst at Argus, with a new stock price target of $26.00. The upgrade is attributed to the company's robust positioning and expanding opportunities within the artificial intelligence (AI) sector.

The firm's analyst cited HP Enterprise's performance in exceeding fiscal first-quarter 2024 expectations in both revenue and non-GAAP EPS as a basis for the improved outlook. The company also provided encouraging forward guidance. A key factor contributing to the positive assessment is HP Enterprise's success in generating revenue from AI servers, signaling a resurgence in its overall compute business.

According to the analyst's remarks, HP Enterprise has amassed cumulative AI systems and services orders totaling $4.6 billion by mid-year fiscal 2024. Despite anticipating a low double-digit decline in earnings for the full fiscal year 2024, HP Enterprise is expected to increase revenue. The analyst's perspective suggests that the company is well-positioned for future sales and profit growth.

The upgrade reflects confidence in HP Enterprise's strategic direction, particularly in the AI space, which is seen as a significant driver of future performance. The company's positive forward guidance and the recovery of its compute business further bolster this optimistic outlook. The new price target of $26.00 represents a vote of confidence in HP Enterprise's trajectory and potential for growth in the coming periods.

In other recent news, HP Enterprise has seen a significant increase in its AI system orders, with revenues reaching approximately $900 million in the second fiscal quarter of 2024. This growth has led to raised full-year revenue and earnings guidance, projecting a revenue between $7.4 billion and $7.8 billion for the third quarter.

Despite this, UBS maintained a Neutral rating on the company's shares but adjusted the price target to $17.00, up from the previous $16.00. Similarly, Evercore ISI reaffirmed its In Line rating for HP Enterprise, maintaining a $22.00 price target on the stock. Susquehanna and Wells Fargo also expressed their confidence in the company's performance by raising their price targets for HP Enterprise's shares to $20 and $22 respectively.

Still, Susquehanna's analysis suggests potential challenges for HP Enterprise in the AI supply chain, which might allow competitors such as NTAP and Dell (NYSE:DELL) to consolidate their positions. These are the recent developments for HP Enterprise in the AI systems market.

InvestingPro Insights

HP Enterprise (NYSE:HPE) has recently garnered attention with its upgraded rating from Hold to Buy and a new price target of $26.00. In line with the analyst's optimism, InvestingPro data provides a quantitative perspective on the company's financial health and market performance.

As of the last twelve months up to Q2 2024, HP Enterprise boasts a market capitalization of $25.46 billion, and an attractive P/E ratio of 12.08, indicating potential undervaluation relative to near-term earnings growth. Furthermore, the company has demonstrated a strong shareholder yield, which is a positive sign for investors seeking returns.

InvestingPro Tips highlight HP Enterprise's significant return over the last week of approximately 10.99%, and a robust one-month price total return of 16.19%, reflecting recent market confidence in the stock. Moreover, the company has maintained dividend payments for 10 consecutive years, with a current dividend yield of 2.65%, which may appeal to income-focused investors. For those considering a deeper dive into HP Enterprise's potential, there are 10 additional InvestingPro Tips available, offering insights that could guide investment decisions.

For readers interested in exploring these metrics further and accessing more in-depth analysis, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This offer could provide valuable guidance for understanding HP Enterprise's place within the Technology Hardware, Storage & Peripherals industry and its AI-driven growth prospects.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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