Loop Capital raises HP Enterprise target to $18, holds rating

On Monday, Loop Capital Markets adjusted its financial outlook for HP (NYSE:HPQ) Enterprise (NYSE:HPE), raising the price target from $16.00 to $18.00 while maintaining a Hold rating on the company’s shares. According to InvestingPro data, the stock currently trades at $18.11, with analysts setting targets between $16 and $26. The revision followed HP Enterprise’s earnings report for the April quarter, released last Thursday, which highlighted a strong performance in server revenue. Six analysts have recently revised their earnings estimates upward for the upcoming period.

HP Enterprise reported a 7% year-over-year increase in Server revenue, reaching $4.1 billion. This growth was despite a 5% quarter-over-quarter decline, attributed to a dip in traditional server volumes, which was partially offset by higher average unit prices. The company, which boasts a market capitalization of $23.76 billion and impressive revenue growth of 11.79% over the last twelve months, has recently begun shipping its Gen12 servers and expressed confidence in their market uptake.

In the Artificial Intelligence (AI) server segment, HP Enterprise secured $1.1 billion in net new orders, with a notable surge in enterprise and sovereign market segments, where enterprise orders constituted one-third of the total. Additionally, HP Enterprise converted $1 billion into revenue, marking a 10% rise both year-over-year and quarter-over-quarter. The company concluded the April quarter with a $3.2 billion backlog, a 3% increase from both the previous year and quarter.

Loop Capital noted that HP Enterprise has effectively addressed the pricing, discounting, and inventory issues that had previously affected server operating margins in the January quarter. As a result, the company now anticipates server margins to reach 10% operating margin by the end of the fiscal year 2025, up from the current 5.9%.

The Hybrid cloud sector also exhibited robust performance, with HP Enterprise’s Alletra product line experiencing triple-digit year-over-year growth. The company also reported an increase in new customer acquisitions, adding 300 new logos quarter-over-quarter. The Intelligent edge segment returned to year-over-year revenue growth, driven by a recovery in the networking market.

Based on these positive developments, HP Enterprise has refined its revenue forecast for the fiscal year 2025, narrowing the expected year-over-year revenue growth range to 7-9% from the previous 7-11%. The company also raised its earnings per share (EPS) guidance to a range of $1.78 to $1.90, up from the earlier projection of $1.70 to $1.90. InvestingPro analysis shows the company maintains a healthy 2.87% dividend yield and an overall GOOD financial health score, with particularly strong momentum metrics. For deeper insights into HPE’s valuation and growth prospects, discover more exclusive analysis and financial metrics on InvestingPro.

In other recent news, Hewlett Packard Enterprise (HPE) reported financial results for the second quarter of 2025, exceeding analyst expectations with an earnings per share (EPS) of $0.38, compared to the projected $0.32. The company also posted revenue of $7.6 billion, slightly above the anticipated $7.46 billion. Despite the strong revenue figures, HPE’s free cash flow was negative at -$847 million. In a strategic move to enhance operational efficiency, HPE announced a 5% workforce reduction.

Additionally, UBS analysts raised the price target for HPE stock to $18 from $16 while maintaining a Neutral rating. The decision followed HPE’s better-than-expected results and ongoing Department of Justice review of the Juniper transaction. Analysts highlighted concerns over HPE’s AI system orders, which totaled $1.1 billion, significantly lower than Dell (NYSE:DELL)’s $12.1 billion for the same quarter. The firm’s AI orders over the trailing five quarters were $4.6 billion, compared to Dell’s $23.2 billion, raising questions about HPE’s competitive position in the AI sector.

UBS noted this competitive gap could impact HPE’s valuation, as Dell trades at 11 times the estimated free cash flow for 2026. Despite these challenges, HPE provided optimistic guidance for the remainder of the fiscal year, projecting constant currency revenue growth of 7-9% and expecting full-year non-GAAP diluted EPS to range between $1.78 and $1.90.

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