HPE Stock Surges: Analysts Raise Price Targets After Impressive Earnings

Hewlett Packard Enterprise (HPE) shares surged following strong fourth-quarter earnings, prompting analysts to raise their price targets for the tech giant. The company's robust performance, driven by AI server demand and a pending acquisition, has fueled optimism about its future prospects. HPE's earnings report showcased a record revenue of $8.5 billion, up 15% year-over-year, with server revenue jumping 32% to $4.7 billion, outpacing analyst estimates.

The impressive results, coupled with the pending acquisition of Juniper Networks, have led analysts to upgrade their price targets for HPE stock. Stifel raised its target to $25, citing robust demand for AI servers and signs of recovery in traditional servers. Morgan Stanley upgraded HPE to "overweight" and increased its target to $28, highlighting the potential for the combined entity's networking business to drive over 40% to 50% of the pro-forma earnings power.

HPE's mid-teens revenue growth outlook for the current quarter, driven by AI and hybrid cloud solutions, further contributed to analysts' bullish sentiments. The company's strong server sales and hybrid cloud services demand have solidified its position in the market, with the HPE GreenLake platform's annualized revenue run-rate surging by 49%.

Despite recent declines in gross margin and free cash flow, HPE's strategic initiatives, such as the pending Juniper Networks acquisition, remain a key driver of growth. The acquisition, expected to close in the early part of 2025, is anticipated to be earnings and free-cash-flow accretive in the first year post-close.