Where Will Hewlett Packard Enterprise Stock Be in 1 Year?

Core Viewpoint - Hewlett Packard Enterprise (HPE) has shown signs of recovery after passing its cyclical trough, with stock surging 11% following a better-than-expected earnings report for Q2 fiscal 2024 [1] Financial Performance - For Q2 fiscal 2024, HPE's revenue increased by 3% year over year to $7.2 billion, exceeding analysts' estimates by $370 million [1] - Adjusted earnings per share (EPS) fell by 19% to $0.42 but still surpassed consensus forecasts by $0.03 [1] - In fiscal 2023, HPE's revenue and adjusted EPS grew by 2% and 6%, respectively, but faced declines in revenue for two consecutive quarters before the recent growth [2][3] Segment Performance - HPE restructured its business segments into four: server (54% of Q2 revenue), intelligent edge (15%), hybrid cloud (17%), and financial services (12%) [4] - Server sales accelerated significantly in Q2 fiscal 2024 due to increased demand for AI workloads, while intelligent edge and hybrid cloud businesses faced declines [4][5] - Annual recurring revenue (ARR) continued to grow robustly, indicating strong customer retention in cloud services [2][3] Future Outlook - HPE expects revenue growth of 6% to 11% year over year in Q3 and 1% to 3% for the full year, slightly higher than previous forecasts [6] - Adjusted EPS is projected to decline by 2% to 12% in Q3 and 9% to 14% for the full year, but this is an improvement from earlier estimates [6] - Analysts predict revenue and adjusted EPS growth of 4% and 9%, respectively, in fiscal 2025 as macro conditions improve [7] Stock Valuation - HPE's stock trades at 11 times forward earnings with a forward dividend yield of 2.7%, suggesting limited downside potential as the core business recovers [7] - The stock is expected to steadily climb higher as macro headwinds dissipate and interest rates decline, although it may not experience explosive growth like other AI-driven stocks [8]