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Following the results of HP Enterprise, the guidance indicates benefiting from the momentum of artificial intelligence: analysts.
The latest quarterly earnings and guidance from HP Enterprise (NYSE:HPE), led by Antonio Neri, indicate that the company continues to see momentum in artificial intelligence, according to Wall Street analysts.
The stock price rose by 2.5% in pre-market trading, with competitors Dell (DELL) and Super Micro Computer (SMCI) also performing well.
Citi upgraded HP Enterprise from Neutral to Buy, raising the target stock price from $23 to $26 based on the belief of improving demand for servers and enterprise networking, expanding opportunities in AI, and gaining profits.
Citi analyst Asha Merchant writes in a note to clients, "AI order/revenue may be bumpy, but I see potential for stronger contributions from corporate AI and Sovereign. This is a positive sign for revenue momentum and future margins." Management is increasingly constructive as they are confident in the improved outlook for core enterprise infrastructure spending, the potential for EPS growth from the Juniper acquisition, and believe the deal will be completed by early 2025.
Matt Niknam, an analyst at Deutsche Bank, expressed his praise as slightly lukewarm as he stated that the results and guidance were "incrementally positive in the current valuation context."
HP Enterprise's server business is gaining momentum from both AI and traditional servers, but AI servers are impacting the gross profit margin. This has decreased to its lowest level since Q4 2020 at 30.9%, leading Niknam, with a Hold rating and a $22 target price, to say.
Furthermore, the company's Hybrid Cloud segment delivered much of the upside surprise this quarter, while the Intelligent Edge (networking business) remains relatively stable after a prolonged period of customer inventory digestion.
"Forward guidance has been impacted by delays in Nvidia's Blackwell and around $0.4 billion in 'rescinded reservations,' with AI server sales sequentially declining," added Niknam.
"Despite F1Q guidance aligning effectively with pre-print consensus, in the context of a significantly discounted valuation (10x CY26E EPS) relative to HPE's short-term growth outlook, he considers the results as "pretty good."
The stock price rose by 2.5% in pre-market trading, with competitors Dell (DELL) and Super Micro Computer (SMCI) also performing well.
Citi upgraded HP Enterprise from Neutral to Buy, raising the target stock price from $23 to $26 based on the belief of improving demand for servers and enterprise networking, expanding opportunities in AI, and gaining profits.
Citi analyst Asha Merchant writes in a note to clients, "AI order/revenue may be bumpy, but I see potential for stronger contributions from corporate AI and Sovereign. This is a positive sign for revenue momentum and future margins." Management is increasingly constructive as they are confident in the improved outlook for core enterprise infrastructure spending, the potential for EPS growth from the Juniper acquisition, and believe the deal will be completed by early 2025.
Matt Niknam, an analyst at Deutsche Bank, expressed his praise as slightly lukewarm as he stated that the results and guidance were "incrementally positive in the current valuation context."
HP Enterprise's server business is gaining momentum from both AI and traditional servers, but AI servers are impacting the gross profit margin. This has decreased to its lowest level since Q4 2020 at 30.9%, leading Niknam, with a Hold rating and a $22 target price, to say.
Furthermore, the company's Hybrid Cloud segment delivered much of the upside surprise this quarter, while the Intelligent Edge (networking business) remains relatively stable after a prolonged period of customer inventory digestion.
"Forward guidance has been impacted by delays in Nvidia's Blackwell and around $0.4 billion in 'rescinded reservations,' with AI server sales sequentially declining," added Niknam.
"Despite F1Q guidance aligning effectively with pre-print consensus, in the context of a significantly discounted valuation (10x CY26E EPS) relative to HPE's short-term growth outlook, he considers the results as "pretty good."
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