Back to top

Image: Bigstock

6 Reasons to Add Hewlett Packard (HPE) Stock to Your Portfolio

Read MoreHide Full Article

Hewlett Packard Enterprise (HPE - Free Report) is currently one of the top-performing stocks in the technology sector. The stock’s price rally reflects the company’s robust fundamentals. Therefore, if you haven’t taken advantage of the share-price appreciation yet, it’s time you add the stock to your portfolio.

Hewlett Packard Enterprise has performed brilliantly over the trailing 12-months and has the potential to sustain the momentum in the days ahead.

Why an Attractive Pick?

Share-Price Appreciation: HPE’s price trend reflects that the stock has had an impressive run on the bourse over the past one year. Shares of the company have rallied 43.1% compared with the Zacks Computer – Integrated Systems industry’s and the S&P 500’s growth of 4.5% and 23.8%, respectively.

Solid Rank & Growth Score: Hewlett Packard Enterprise currently has a Zacks Rank #1 (Strong Buy) and a Growth Score of B. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northward Estimate Revisions: Analysts have raised the estimates for fiscal 2022 and fiscal 2023 over the past 90 days, reflecting their confidence in the company. During the same period, the Zacks Consensus Estimate for fiscal 2022 and 2023 moved north by 3 cents and 19 cents, respectively.

Positive Earnings Surprise History: Hewlett Packard Enterprise has an impressive earnings surprise history. The company outpaced earnings estimates in each of the trailing four quarters, the average surprise being 14.4%.

Solid Growth Prospects: The Zacks Consensus Estimate of $2.03 for fiscal 2022 earnings suggests growth of 3.6% from the year-ago period. For fiscal 2023, earnings are expected to increase 8.6% year over year and are likely to reach $2.20 per share. The long-term earnings per share growth rate is estimated to be 5.8%.

Growth Drivers: Hewlett Packard Enterprise has been benefiting from strong executions in clearing backlogs, improved supply-chain and increased customer acceptance. Its efforts to shift focus to higher-margin offerings like Intelligent Edge and Aruba Central Hyperconverged Infrastructure are aiding its bottom-line results. Its target of saving at least $800 million annually by fiscal 2022-end through a cost optimization plan is a positive.

The company has been pursuing acquisitions to focus more on high-margin hybrid information technology (“IT”) models that leverage on-premises and cloud-computing power. In 2021, the company acquired four businesses – Ampool, Zerto, Determined AI and CloudPhysics – which have expanded its capabilities and product portfolios in the fast-growing cloud space including software-defined networks and converged and hyper-converged infrastructure.

The acquisition of software-defined wide area network leader, Silver Peak, in 2020 has strengthened the company’s Aruba Edge Services platform. Prior to that, the acquisitions of Cray and MapR in 2019 strengthened its capabilities in high-performance computing and data analytics platforms. Some of HPE’s notable buyouts in the hybrid IT space are SimpliVity and Cloud Technology Partners.

The company’s strategic plan of investing $4 billion in artificial intelligence, industrial internet of things and distributed computing will boost its revenues in the long run. Hewlett Packard Enterprise has linked these businesses to its fast-growing networking business arm — Aruba Networks. The strategy would help the company diversify its business from server and hardware storage markets. Notably, server and hardware storage markets have been witnessing stagnant growth for the past several quarters as more and more organizations are shifting to cloud computing due to their cost-effectiveness and anywhere accessibility features.

Other Stocks to Consider

Some other top-ranked stocks from the broader computer and technology sector include the largest global Customer Relationship Management vendor Salesforce (CRM - Free Report) flaunting a Zacks Rank #1, and Advanced Micro Devices (AMD - Free Report) and CACI International (CACI - Free Report) , both carrying a Zacks Rank #2.

The Zacks Consensus Estimate for Salesforce’s fourth-quarter fiscal 2022 earnings has been revised downward by 7.6% to 73 cents per share over the past 60 days. For fiscal 2022, earnings estimates have moved upward by 0.43% to $4.68 per share in the last 30 days.

Salesforce’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 44.2%. CRM stock has appreciated 4.7% in the past year.

The Zacks Consensus Estimate for Advanced Micro Devices’ fourth-quarter 2021 earnings has been revised upward by 7 cents to 75 cents per share over the past 90 days. For 2021, earnings estimates have moved north by a penny to $2.65 per share in the past 30 days.

Advanced Micro Devices’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 14%. Shares of AMD have rallied 35.8% in the past year.

The consensus mark for CACI’s second-quarter fiscal 2022 earnings has been revised downward to $3.99 per share from $4.43 over the past 90 days. For fiscal 2022, earnings estimates have been revised downward by 8.9% to $16.42 per share in the last 90 days.

CACI’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 18.8%. Shares of CACI have increased 13.9% in the past year.