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 (NYSE:WFC) 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.
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