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Is Hewlett Packard (HPE) a Good Bet Amid Market Uncertainties?

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Adding Hewlett Packard Enterprise Company (HPE - Free Report) to your portfolio seems a wise idea amid the current macroeconomic and geopolitical uncertainties, given the strength of its fundamentals and solid prospects.

Since the beginning of 2022, the U.S. equity market has been witnessing severe volatility on increasing crude oil prices and rising inflation concerns. The ongoing Russia-Ukraine war has further increased worries for investors about global economic recovery.

The aforementioned factors have led to a massive sell-off in the stock market, with the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 plunging 4.7%, 9.2% and 5.1%, respectively, on a year-to-date basis.

The aforementioned global macroeconomic and geopolitical uncertainties are likely to continue weighing on investors’ sentiments, which can result in more volatility in the U.S. equity market.

However, this volatility has created buying opportunities for investors. In the current scenario, investors can look for stocks with strong fundamentals that can stay afloat and grow once the impact of the aforementioned uncertainties cools off.

Considering Hewlett Packard’s resilience against the ongoing macroeconomic and geopolitical uncertainties and its strong fundamentals, it is wise to continue investing in the stock for further gains. With a year-to-date gain of 0.2%, HPE shares have outperformed the broader U.S. stock market.

Year-To-Date Price Performance

Zacks Investment Research
Image Source: Zacks Investment Research

Why Is HPE Stock an Attractive Pick?

Hewlett Packard currently has a Zacks Rank #2 (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 (Strong Buy) or 2, 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.

The Zacks Consensus Estimate of $2.10 per share for fiscal 2022 earnings suggests growth of approximately 7.1% from the year-ago period. For fiscal 2023, the consensus mark for earnings is pegged at $2.23, indicating a year-over-year increase of 5.9%. The long-term earnings per share growth rate is estimated at 6%.

Hewlett Packard has an impressive earnings surprise history. The company outpaced estimates in all the trailing four quarters, delivering an average earnings surprise of 10.7%.

Analysts have raised estimates for fiscal 2022 and fiscal 2023 over the past 60 days, reflecting their confidence in the company. During the same period, the Zacks Consensus Estimate for fiscal 2022 and 2023 earnings has moved north by 7 cents and 3 cents per share, respectively.

Solid Fundamental Growth Drivers

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

Hewlett Packard has been pursuing acquisitions to focus more on high-margin hybrid IT models that leverage on-premises and cloud-computing power. In 2021, Hewlett Packard 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 the software-defined wide area network leader, Silver Peak, in 2020 strengthened the company’s Aruba Edge Services platform. Before 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 AI, the industrial Internet of Things and distributed computing will boost its revenues in the long run. Hewlett Packard linked these businesses to its fast-growing networking business arm – Aruba Networks. The strategy will help the company diversify its business from server and hardware storage markets, which have been witnessing stagnant growth for the past several quarters as more organizations are shifting to cloud computing due to its cost-effectiveness and anywhere accessibility features.

Other Stocks to Consider

Some other similar-ranked stocks from the broader technology sector include Jabil (JBL - Free Report) , Broadcom (AVGO - Free Report) and Apple (AAPL - Free Report) .

The Zacks Consensus Estimate for Jabil’s third-quarter fiscal 2022 earnings has been revised upward to $1.62 per share from $1.46 30 days ago. For fiscal 2022, earnings estimates have been revised upward by 67 cents to $7.25 per share in the past 30 days.

Jabil’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 13.5%. Shares of JBL have rallied 12.6% in the trailing 12 months.

The Zacks Consensus Estimate for Broadcom’s second-quarter fiscal 2022 earnings has been revised upward by 10.2% to $8.64 per share over the past 60 days. For fiscal 2022, earnings estimates have moved upward by 22 cents to $35.49 per share over the past 30 days.

Broadcom’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 1.9%. Shares of AVGO have rallied 27.3% over the past year.

The Zacks Consensus Estimate for Apple’s second-quarter fiscal 2022 earnings has been revised upward by seven cents to $1.43 per share over the past 90 days. For fiscal 2022, earnings estimates have moved upward by a penny to $6.16 per share in the past 60 days.

Apple’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while meeting the same on one occasion, the average surprise being 20.3%. AAPL stock has soared 37% in the past 12 months.

In-Depth Zacks Research for the Tickers Above

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Apple Inc. (AAPL) - free report >>

Jabil, Inc. (JBL) - free report >>

Broadcom Inc. (AVGO) - free report >>

Hewlett Packard Enterprise Company (HPE) - free report >>