Hewlett Packard Enterprises Stock (HPE) Firmly off Lows, Down 20% YTD Into Earnings – What To Expect

Hewlett Packard Enterprise (NYSE: HPE) finds itself at an important juncture leading into latest earnings, with its stock trading at $17.18, down 20% since the start of the year. The bear trend has followed a period of strategic shifts for the technology giant, as it grapples with activist investor involvement, regulatory hurdles, and evolving market demands.

While HPE may be well positioned to capitalize on the growing demand for AI infrastructure, challenges remain in the form of cost pressures and regulatory scrutiny of its proposed acquisition of Juniper Networks.

All eyes are now on HPE's Q2 2025 earnings report, scheduled for release after market close today. Analysts are anticipating an earnings per share (EPS) of $0.33, and revenue of $7.3 billion, marking a substantial 4.07% year-over-year growth.

These figures will be crucial in determining whether HPE can deliver on its promises and regain investor confidence, but perhaps more important, will be the outlook or guidance from here. The previous fiscal quarter saw a revenue beat at $7.85 billion, but adjusted earnings of $0.49 per share fell short of expectations, triggering a significant drop in the stock price.

Today's earnings announcement will be closely scrutinized for signs of recovery and sustainable growth.

Analysts have been more inclined to raise their price targets on HPE before the company's earnings call. Morgan Stanley have raised the firm's price target from $14 to $22 and kept an “Equal” weight on the shares. Evercore ISI have also upped their price target on HPE. The firm has changed their rating on the shares to “Outperform”.

The average target price for HPE stands at $19.98, with the lower end at $15 and the high at $26.00. Both Morgan Stanley and Evercore ISI have given their vote of confidence to HPE into earnings.

🟩 The Bull Case for NYSE: HPE

• Strong growth potential in the AI server market.
• Elliott Management's involvement could unlock value and drive strategic improvements.
• Cost-cutting measures could improve profitability and margins.
• Positive revenue growth expected in the upcoming earnings report.

🟥 The Bear Case for NYSE: HPE

• Regulatory challenges to the Juniper Networks acquisition create uncertainty.
• Cost-cutting measures could negatively impact employee morale and innovation.
• Earnings miss in the previous quarter raises concerns about execution.
• Longer-term bearish trend indicated by the stock price being below the 200-day SMA.

Adding another layer of complexity is the recent revelation that activist hedge fund Elliott Management has acquired a $1.5 billion stake in HPE. Elliott's move, its first major campaign since the Trump-era tariff policies, sent HPE shares soaring by 7% upon the announcement.

While Elliott's specific demands remain undisclosed, the firm is known for pushing for strategic changes within technology companies, suggesting potential pressure on HPE to improve its performance and unlock value. This intervention could lead to significant shifts in HPE's strategic direction, operational efficiency, or capital allocation policies.

However, HPE's path forward is not without obstacles. The company's proposed $14 billion acquisition of Juniper Networks is currently facing a legal challenge from the U.S. Department of Justice, which filed a lawsuit to block the deal on antitrust grounds. The trial is set to begin on July 9, 2025, and the outcome will have a significant impact on HPE's strategic expansion plans. A successful acquisition of Juniper would strengthen HPE's position in the networking market and enhance its ability to offer comprehensive solutions to its customers. However, a failed acquisition would force HPE to explore alternative growth strategies and potentially face increased competition.

In response to margin pressures, HPE has initiated a cost-cutting program aimed at achieving $350 million in gross savings by fiscal year 2027. This initiative includes a reduction of approximately 2,500 jobs, representing about 5% of the workforce when accounting for expected attrition, as well as limitations on travel and discretionary spending. While these measures are intended to improve profitability, they also carry the risk of negatively impacting employee morale and innovation.

First up to watch will be earnings, attention will then likely shift to any strategic shifts from here. With HPE having rallied more than 38% from April's lows, there are hints of a recovery in the stock, although this needs to be tempered against the fact that YTD highs of $24.66 remain a long way away.