Hewlett Packard Enterprise (HPE) is anticipated to report strong third-quarter earnings, according to JPMorgan analyst Samik Chatterjee. He believes several factors are setting the stage for a positive outcome, including:
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Robust AI Demand:
The demand for artificial intelligence solutions remains strong, indicating a positive outlook for HPE’s AI server sales.*
Recovering Infrastructure:
Traditional IT hardware is experiencing a rebound, with peers reporting a surge in demand for traditional servers. This signals a positive trend for HPE’s infrastructure business.*
Rising Networking Equipment Demand:
Demand for networking equipment is on the upswing, further supporting HPE’s overall performance.*
Favorable Valuation:
HPE’s stock is trading at an attractive valuation, making it an inexpensive investment opportunity.Chatterjee believes these factors indicate a higher likelihood of upward revisions to estimates from the upcoming earnings report. He expects HPE to report third-quarter revenue of $7.75 billion, exceeding the Wall Street consensus estimate of $7.661 billion. JPMorgan also forecasts earnings per share of 48 cents, one penny above the consensus estimate.
The analyst expects the strength in HPE’s results to be driven by growth in AI server revenues, as well as sequential growth in both Hybrid Cloud and Intelligent Edge segments. These gains are fueled by recoveries in traditional infrastructure demand.
JPMorgan has also increased its forecasts for the fourth quarter, predicting revenue of $8.21 billion versus a consensus of $8.14 billion and fourth-quarter EPS of 56 cents compared to a consensus of 54 cents. This growth is attributed to a recovery in both shipments and pricing for General Purpose Servers.
The firm projects full-year 2024 EPS of $1.95 for HPE, aligning with the high end of earlier guidance that ranged between $1.85 and $1.95.
HPE’s stock price dipped 1.6% to $19.07 during early afternoon trading on Tuesday. While some exchange-traded funds holding HPE stock saw gains, others experienced losses.
