To The Moon

$Hewlett Packard Enterprise(HPE)$ is scheduled to report its quarterly result for period ending 31 July 2024 on 04 September 2024 after market close.

HPE is expected to show a 9.4% increase in revenue to $7.661 billion from $7 billion a year ago. This is within the guidance provided by HPE on 04 June 2024 for period ended 31 July that was for revenue between $7.40 billion and $7.80 billion.

The consensus EPS forecast for the upcoming quarterly result is 47 cents, this is inline with the EPS guidance that HPE has provided on 04 June 2024 for the period ending 31 July which was between $0.43 and $0.48.

This is driven by strong sequential growth in CPU/GPU servers and networking equipment.

HPE To Benefit From Increased Investment In Enterprise AI Infrastructure

TrendForce reveals that although the overall environment this year has been impacted by AI budget constraints—leading to slower-than-expected growth for general—recent procurement strength for related components such as BMCs and new CPUs indicates an improving trend for new server platforms among OEMs and CSPs. Additionally, surveys of ODM supply chains reveal that server shipments, after a seasonal dip in the first quarter, are expected to show sequential growth in the second and third quarters.

HPE is poised for growth in AI infrastructure and general compute servers as enterprises increase their investment in CPU + GPU. Valued lower than peers, HPE is positioned as a value play in the server space, with significant growth opportunities in private, public, and hybrid cloud environments.

OEMs and CSPs are more aggressively preparing CPUs compared to previous periods. Both Intel's Sapphire Rapids and Emerald Rapids, as well as AMD's Bergamo and Genoa, are showing significant growth thanks to increased cloud-related demand. In the BMC sector, strong procurement momentum, particularly for the GB200, and stockpiling by Chinese companies are leading to larger orders at the end of Q2 and into Q3. TrendForce expects bit shipments to exceed initial forecasts, with DDR5's share rising to the 60% mark in Q3.

TrendForce has observed that server demand will increase from Q2 to Q3, with enterprise OEMs—such as Dell, HPE, and Lenovo—showing the most significant shipment growth. This growth is driven not only by strong demand for AI servers but also by tenders postponed due to the pandemic and the rising need for AI-driven storage servers. As a result, Q2 shipment performance has been strong and is expected to continue into Q3, with an estimated quarterly growth of 4-5%.

I am expecting HPE to grow its shipment higher than $Dell Technologies Inc.(DELL)$ in time to come.

HPE Price Target Forecast

Based on 10 Wall Street analysts offering 12 month price targets for Hewlett Packard Enterprise in the last 3 months. The average price target is $20.78 with a high forecast of $24.00 and a low forecast of $17.00. The average price target represents a 7.28% change from the last price of $19.37.

HPE stock price is undervalued but the important thing is whether their earnings can create value in its stock price which might see a good growth if the upcoming quarterly earnings beat the estimates.

With competitions coming from Dell, HPE need to show that they can move up one notch to close up the gap in server demand, and HPE networking equipment is also facing challenges from Cisco.

HPE Year-To-Date Returns

HPE has returned significant growth on its stock price but can it continue to do well? The current macroeconomic environment and also the move into AI will have hardware provider like HPE whether they can upped the game and get closer to its competitors.

HPE Technical (MACD and KDJ)

From technical, it looks like investors are still positive about this stock as seen in KDJ potentially forming a upside movement. If we looked at the MACD, we can see that it is actually in an upside move with a good buying demand from investors.

I will be monitoring this stock on 03 September to see if the price action suggest positive sentiment from traders and investors for more upside movement.

Summary

What we need to look out for is HPE strong demand for its server and networking equipments is whether it is receiving enough bookings for 2024, and whether we can see the growth closing the gap with its competitors.

I would think the current HPE stock price is undervalued and it might be a good time to consider this stock for long term.

Appreciate if you could share your thoughts in the comment section whether you think HPE could beat earnings estimate and show a nice upside in its stock price.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.