Hewlett Packard Enterprise Climbs 18% YTD: What Should Investors Do?

Hewlett Packard Enterprise HPE shares have gained 17.5% in the year-to-date period. HPE stock has underperformed the Zacks Computer - Integrated Systems industry, Zacks Computer and Technology Sector and the S&P 500 index’s return of 27.1%, 22.1% and 20%, respectively.Amid this period of relatively slower growth, HPE stock is currently trading at a significantly lower price-to-earnings (P/E) multiple, well below the averages of the industry, broader tech sector and the S&P 500.HPE’s forward 12-month P/E ratio is 9.56, significantly lower than the Zacks Computer Integrated Systems, Zacks Computer and Technology sector and the S&P 500’s average of 20.3, 26.7 and 22, respectively. The significant undervaluation raises a question for investors: Is it the right time to buy the stock?Growing Adoption of Greenlake Aids HPEIn the third quarter of fiscal 2024, the number of organizations using GreenLake grew nearly 9% sequentially to 37,000, contributing an annualized revenue run rate that has increased 39% year over year, reaching more than $1.7 billion.HPE's GreenLake is gaining traction for several compelling reasons. GreenLake offers a flexible and scalable solution that allows businesses to manage their IT resources with enhanced efficiency. This flexibility is crucial in a world where digital transformation is no longer optional but necessary for survival.Another key factor is GreenLake’s consumption-based pricing model. This model offers predictable economics, which is particularly attractive in today’s cost-conscious business environment.Hewlett Packard Enterprise YTD PerformanceImage Source: Zacks Investment ResearchHPE Gains From Expanding Partner BaseHewlett Packard Enterprise is expanding its AI footprint through partnerships with industry leaders, including NVIDIA NVDA and Microsoft MSFT. HPE has been experiencing double-digit sequential growth in AI systems orders and revenues.HPE has been in partnership with NVIDIA while foraying into the AI market. Together, the two companies released NVIDIA AI Computing by HPE where they combined their expertise. HPE also combined NVIDIA NIM Agent Blueprints to HPE Private Cloud AI for multiple AI use cases. Furthermore, Hewlett Packard Enterprise and Microsoft collaborated to develop Azure Stack HCI systems that also include artificial intelligence-based solutions. These collaborations, along with HPE’s other AI initiatives, are adding to its top line.In the third quarter of fiscal 2024, the company reported that it had $6.2 billion in cumulative orders for AI products and services since the first quarter of fiscal 2023. The quarterly revenues in the third quarter of fiscal 2024 from AI products and services were $1.3 billion and backlogs were $3.4 billion.HPE Expands Through AcquisitionsHewlett Packard Enterprise acquired Morpheus Data in 2024 and is in the process of acquiring Juniper Networks JNPR. The acquisition of Morpheus Data is set to enable HPE GreenLake cloud to simplify IT complexity.The acquisition of Juniper Networks will benefit HPE in two key ways. Firstly, Juniper, being a former competitor of HPE in the networking space, will lead to the further consolidation of the market while expanding HPE’s capabilities and market share brought in by the JNPR acquisition.For the fourth quarter of fiscal 2024, HPE expects its revenues in the range of $8.1-$8.4 billion. The Zacks Consensus Estimate for the same is pegged at $8.27 billion, implying year-over-year growth of 12.5%. This gives HPE a strong near-term outlook.What Should Investors Do?Since HPE is benefiting from the growing adoption of its major products, including Greenlake and other AI-based products, the company has strong long-term prospects. Its revenue outlook for fourth-quarter fiscal 2024 makes its near-term outlook strong.Hewlett Packard Enterprise currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors. HPE stock appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Juniper Networks, Inc. (JNPR): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Hewlett Packard Enterprise Company (HPE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks