Buy HPE Stock At $18?

Hewlett Packard Enterprise (NYSE:HPE) recently revealed its Q2 fiscal 2025 results (the fiscal year concludes in October), slightly surpassing analyst forecasts. The firm announced earnings of $0.38 per share on revenues of $7.6 billion, exceeding consensus predictions of $0.33 and $7.5 billion, respectively. Even with this favorable result, HPE's stock largely stayed around $18. This inertia can be partially ascribed to the company revising its full-year revenue growth outlook to 7% to 9%, a reduction from its earlier estimate of 7% to 11%. If you're seeking consistent returns, you may want to examine diversified investment avenues such as the Trefis High Quality portfolio, which has demonstrated exceptional performance, achieving returns of over 91% since its inception. Additionally, see – RGTI Stock: What's Next After An 1,100% Rally?
Considering HPE's latest performance, you may be questioning whether it's a wise investment right now. From a valuation standpoint, we believe HPE stock seems to have potential for growth. Priced at roughly $18 per share, it is valued at 0.7 times its trailing revenues. This is slightly lower than its three-year average price-to-sales (P/S) ratio of 0.8 times.
Although a decline in valuation multiples might seem warranted by the company's average revenue growth of only 3% over the past three years and a drop in its net income margin from a three-year average of 6% to the current 4%, this doesn't capture the entire picture.
HPE's Q2 results exhibited year-over-year revenue growth of 6%. Its Annualized Revenue Run Rate (ARR) surged by 46% to $2.2 billion, fueled by a robust 13% increase in hybrid cloud revenue, a 7% rise in intelligent edge segment sales, and a 6% increment in server revenue.
While the adjusted gross margin fell by 370 basis points year-over-year to 29.4%, HPE's net income was significantly affected by a non-cash impairment charge of $1.4 billion for legacy goodwill, leading to a GAAP loss of $0.82 per share. However, on an adjusted basis, HPE posted earnings of $0.38 per share, reflecting a slight decrease from $0.42 in the same quarter of the previous year. Looking forward, HPE's Q3 revenue forecast of $8.2 billion to $8.5 billion also surpassed the consensus prediction of $8.17 billion.
Building on the valuation discussion, HPE is currently experiencing a growth rate faster than it has for the previous three years. Analysts anticipate sales to increase by 8% this year and an additional 6% the following year. This upward trajectory of growth suggests that an increase in valuation multiples is justified. Notably, the average price target set by analysts for HPE is $21, reflecting an upside potential of over 15%. This target corresponds to a 0.9 P/S ratio, in contrast to the current 0.7x and the three-year average of 0.8x.
HPE's strategic priority lies in its edge-to-cloud platform transition, especially leveraging its GreenLake hybrid cloud solution. This strategy is designed to capture recurring income through flexible consumption models that effortlessly connect on-premises with cloud environments. The company's strategic pivot towards edge, hybrid cloud, and AI delivered via the HPE GreenLake platform is yielding success. Moreover, HPE's alliance with NVIDIA for integrated AI computing solutions places it in a competitive position against hyperscaler-driven alternatives by providing enterprise clients with on-premises and edge deployment flexibility. On another note, take a look at – Is CRWD Stock Overvalued At $460?
While the valuation of HPE stock seems to present an opportunity for growth, it is essential to factor in potential risks. Historically, HPE's stock has underperformed the broader market during economic recessions. For example, it dropped by 32% from its peak amid the 2022 inflation shock, compared to a 25% decrease for the S&P 500. Similarly, during the COVID-19 market correction in 2020, it plummeted by 52% against a 34% drop for the S&P 500. This pattern implies that HPE stock is more susceptible to adverse macroeconomic conditions. See – Buy or Sell HPE Stock – for further details.
You may consider purchasing HPE stock in the current downturn, but remember that investing in a single stock, no matter how promising, carries risks. If you wish to mitigate that risk while benefiting from substantial upside, consider the High Quality portfolio, which has outperformed the S&P 500 and generated returns exceeding 91% since its inception. Why is that? As a collective, HQ Portfolio stocks have yielded better returns with lower risk compared to the benchmark index; offering a smoother investment journey, as shown in HQ Portfolio performance metrics.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Yahoo

3 hours ago

• Yahoo

Citi Increases PT on Oracle (ORCL), Keeps Neutral

Oracle Corporation (NYSE:ORCL) is one of the 10 software stocks analysts are upgrading. On June 12, Citi raised the price target on the company's stock to $196 from $186, while keeping a 'Neutral' rating. The firm believes that Oracle Corporation (NYSE:ORCL)'s Q4 2025 results are incrementally positive considering fiscal 2026 demand. That being said, the company's near-term earnings and FCF estimates have been falling. A team of IT professionals meticulously crafting a large-scale enterprise performance management system. As per Citi, Oracle Corporation (NYSE:ORCL) posted a strong Q4 2025, while it saw modest bookings growth. However, this was overshadowed by a strong fiscal 2026 sales outlook amidst accelerating cloud, remaining performance obligation, and total revenue growth, added the analyst. Oracle Corporation (NYSE:ORCL) expects its total cloud growth rate, applications plus infrastructure, to increase from 24% in FY 2025 to more than 40% in FY 2026. Notably, the Cloud Infrastructure growth rate is anticipated to increase from 50% in FY 2025 to more than 70% in FY 2026, while RPO is projected to grow over 100% in FY 2026. Also, Oracle Corporation (NYSE:ORCL) anticipates triple-digit MultiCloud revenue growth to continue in FY 2026. Ariel Investments, an investment management company, released its Q1 2025 investor letter. Here is what the fund said: 'Lastly, global leader in enterprise software, Oracle Corporation (NYSE:ORCL), traded lower alongside the broader technology sector due to macroeconomic uncertainty and in particular, the near-term prospects for artificial intelligence investment (AI) spending. As a result, ORCL reported weaker than expected quarterly earnings results. Nonetheless, management expects double-digit growth for fiscal 2026 and 2027, citing significant demand for its cloud and AI capabilities. This supports our view that ORCL's positioning as the leading provider of database software and cloud-based infrastructure is entrenched, making it a key beneficiary of global demand for generative AI development.' While we acknowledge the potential of ORCL to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than ORCL and that has 100x upside potential, check out our report about this cheapest AI stock. READ NEXT: 13 Cheap AI Stocks to Buy According to Analysts and 11 Unstoppable Growth Stocks to Invest in Now Disclosure: None.

Yahoo

6 hours ago

• Yahoo

Zeta Global (ZETA) Jumps 12.6% on Untapped AI Opportunities

Zeta Global Holdings Corp. (NYSE:ZETA) is one of the Zeta Global Holdings rallied by 12.63 percent on Friday to end at $14.18 apiece as investors snapped up shares following a study that marketing companies are lagging behind AI execution vis-a-vis its ambitions. In its study called 'It's Time to Get Serious About AI's Business Value,' Zeta Global Holdings Corp. (NYSE:ZETA) said that while many marketing organizations have begun implementing AI, most are still in the early stages of building the data, skills and systems required to scale it effectively and realize its full enterprise potential. Based on a survey of 300 North American marketing technology decision-makers, the study found that 62 percent of organizations described their current AI deployment as 'limited' or 'moderate.' The study was viewed by investors as a huge potential and opportunity for Zeta Global Holdings Corp. (NYSE:ZETA) to tap. 'Marketing should be at the front lines of the AI revolution, but many teams are held back by fragmented data, legacy systems, and skills gaps,' said Chairman and CEO David Steinberg. A marketing manager looking at the data dashboard of a marketing automation software showing successful campaign results. 'This study reinforces what we hear every day: marketers don't need more AI promises; they need practical, scalable ways to turn AI into better performance.' While we acknowledge the potential of ZETA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

Business Insider

11 hours ago

• Business Insider

Ibstock (IBST) Gets a Buy from Jefferies

In a report released yesterday, Priyal Woolf from Jefferies maintained a Buy rating on Ibstock (IBST – Research Report), with a price target of £1.90. The company's shares closed yesterday at p151.40. Confident Investing Starts Here: According to TipRanks, Woolf is ranked #8378 out of 9595 analysts. Currently, the analyst consensus on Ibstock is a Strong Buy with an average price target of p213.20, which is a 40.82% upside from current levels. In a report released on June 12, Deutsche Bank also maintained a Buy rating on the stock with a £2.20 price target. Based on Ibstock's latest earnings release for the quarter ending December 31, the company reported a quarterly revenue of p188.02 million and a net profit of p6.5 million. In comparison, last year the company earned a revenue of p183.11 million and had a GAAP net loss of p1.34 million Based on the recent corporate insider activity of 6 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of IBST in relation to earlier this year.