Hewlett Packard Enterprise Stock Outlook Shows Key Growth Ahead

Recent reports highlight Hewlett Packard Enterprise's strong performance and promising growth in AI and GreenLake. With a low P/E ratio and expanding opportunities, investors may find HPE an attractive buy, despite slightly underperforming the market.

Date: 03-10-2024

AI Rating: 7

Hewlett Packard Enterprise (HPE) is experiencing a noteworthy year with shares up by 17.5% year-to-date, although this is below the S&P 500 index which has risen by 20%. The underperformance raises questions about HPE's valuation, which is significantly lower than the industry and broader tech sector averages. HPE's forward P/E ratio sits at 9.56, contrasting sharply with averages of 20.3 for the Zacks Computer Integrated Systems, 26.7 for the Zacks Computer and Technology sector, and 22 for the S&P 500. This undervaluation suggests potential for a correction as investors reconsider its stock value.

One of the key drivers for HPE's growth is the adoption of its GreenLake service, with a reported annualized revenue run rate that has surged by 39% year over year, now exceeding $1.7 billion. This growth underscores the demand for flexible, consumption-based IT solutions, an aspect highly favored in the current business landscape.

Furthermore, HPE's partnerships with major players like NVIDIA (NVDA) and Microsoft (MSFT) in the growing AI market are showing promising results, including $6.2 billion in cumulative orders for AI products since fiscal 2023 and quarterly AI revenues of $1.3 billion. This reflects a doubling in AI-related revenue and positions HPE favorably for future prospects.

With expected revenues for the fourth quarter of fiscal 2024 in the range of $8.1-$8.4 billion and a consensus estimate of $8.27 billion (a 12.5% increase year-over-year), HPE's outlook appears strong. This further reinforces the positive sentiment surrounding the stock, particularly with its current Zacks Rank #2 (Buy).

In conclusion, HPE has strong long-term growth potential driven by its product adoption and strategic partnerships, marking it as a compelling option for investors.

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