Hewlett Packard Enterprise (HPE) is one of the best S&P 500 stocks Friday, behind only Lululemon Athletica (LULU), after the tech giant beat top- and bottom-line expectations for its fiscal 2024 fourth quarter.
In the three months ended October 31, Hewlett Packard's revenue increased 15.1% year over year to $8.5 billion, boosted by 31.7% growth in its server segment to $4.7 billion. Its earnings per share (EPS) rose 12% from the year-ago period to 58 cents.
"HPE delivered an exceptional fourth quarter with record quarterly revenue, capping off a strong fiscal 2024. We exceeded our full-year commitments for revenue, EPS, and free cash flow," said Hewlett Packard CEO Antonio Neri in a statement. "Our differentiated portfolio across hybrid cloud, artificial intelligence (AI), and networking, which will be further enhanced with the pending Juniper Networks acquisition, positions us well to capitalize on the market opportunity, accelerating value for our shareholders."
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The results exceeded analysts' expectations. Wall Street was anticipating revenue of $8.3 billion and earnings of 56 cents per share, according to CNBC.
For its fiscal 2025 first quarter, HPE said it expects to achieve mid-teens percentage revenue growth and earnings per share in the range of 47 cents to 52 cents.
Is Hewlett Packard stock a buy, sell or hold?
Hewlett Packard has had a solid run up the price charts in 2024, up 40% for the year to date vs the S&P 500's 29% return. Unsurprisingly, Wall Street is bullish on the tech stock. According to S&P Global Market Intelligence, the consensus recommendation among the 18 covering analysts it tracks is a Buy.
However, analysts' price targets have failed to keep up with the stock's surge, with the average target of $23.27 right around where HPE's current share price. Wall Street could be encouraged to start raising price targets following Hewlett Packard's post-earnings pop.
Indeed, financial services firm Stifel maintained a Buy rating on the large-cap stock after earnings and raised its price target to $25 from $22.
"We believe shares of Hewlett Packard Enterprise are undervalued, given the company's broad portfolio of enterprise infrastructure hardware, software, and services," says Stifel analyst Matthew Sheerin.
"We see AI servers as a key driver of topline growth heading into fiscal 2025, and expect gross margin to improve on mix and increased attachment of software and services. Our target price of $25 values the stock at around 11 times forward earnings, above its historical average price-to-earnings (P/E) ratio but still well below its peer group," the analyst adds.
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