HPE: Should You Add Hewlett Packard Stock to Your 2021 Watchlist?

Hewlett Packard (HPE) provides hardware and services that are enterprise-facing as opposed to consumer-facing. Alternatively, HP Inc. makes reliable computers, printers, scanners, and other computer-related devices for use at home, trading under the symbol of HPQ. The two businesses split in November of 2015.

HPE was priced slightly below $20 in 2018, yet the stock has reversed course since, currently trading at a mere $11.79 per share. It is concerning that HPE first traded at $9.90 back in October of 2015. This means the stock has increased a mere $2 per share in the past half-decade even though it has a solid reputation amongst its enterprise clients. Let’s take a look at whether HPE is worthy of a place on your watchlist.

HPE by the Numbers

Take a close look at HPE’s facts and figures, and you will agree the one number that leaps out from the page is the stock’s forward P/E ratio. HPE has an astonishingly low forward P/E ratio of a mere 7.40. If you were to rewind time back to the 90s, the talking heads on CNBC were adamant a P/E ratio of 12 was optimal for a stock. Nowadays, most stock market experts insist 20 is a reasonable P/E ratio. However, HPE is well below both of these benchmarks. It is clear that HPE is undervalued at its current trading price, just under $12.

Another intriguing number that pops off the page is HPE’s dividend of 4.08%. This is a fairly high dividend for a tech stock. You will be hard-pressed to find a more intriguing play than HPE, mainly because of the income its high dividend provides.

It is also intriguing to note HPE has a 52-week high of $16.18 and a 52-week low of $7.43. The stock is trading $4 above its low and nearly $5 away from its high.

The Analysts’ Take on HPE

Analysts view HPE as underpriced by slightly more than 1%. The average analyst price target for the stock is $11.94. Of the ten analysts who cover HPE, six recommend holding; two recommend buying, and two advise selling. In other words, there is no analyst consensus on HPE. The stock could easily climb 5% or drop 5% in the months ahead, and it wouldn’t be much of a surprise.

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Check out HPE’s POWR Ratings, and you will find the stock is ranked 26th of 60 stocks in the Technology – Services industry. HPE has “C” grades in the Buy & Hold Grade and Trade Grade components. In terms of performance, HPE has a concerning year-to-date loss of 22.33%, which followed a 23.72% return in 2019.

Latest Earnings

Take a look at HPE’s most recent quarterly earnings, and you will see mixed results. HPE’s fourth-quarter non-GAAP earnings came in at 37 cents per share. This figure beat analysts’ expectations of 34 cents per share. However, earnings were significantly lower year over year.

HPE’s $7.2 billion revenue is down a mere 0.1% from this time one year ago. The good news is that the company was able to clear out its $250 million backlog successfully. Furthermore, top-line progress results from the company’s as-a-service platform and improvements in Intelligent Edge and HPC & MCS.

HPE is in a good position now that its software-as-a-service and edge-to-cloud data storage is in high demand following the shift to remote working. Furthermore, HPE’s storage segment has generated 8% sequential revenue growth, its Intelligent Edge division revenue is up 15%, and its financial service segment’s revenue is up 5%.

The Verdict

Though HPE is rarely mentioned amongst the cloud stocks, the bottom line is that the company is benefitting from the transition away from in-office work to working with the cloud’s assistance. HPE’s recent quarterly performance was much better than expected, painting a rosy picture for the stock’s future. HPE is likely underpriced at its current trading level of $11 to $12 per share. This stock is more than deserving of a place on your watchlist.

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HPE shares were trading at $11.65 per share on Tuesday afternoon, down $0.14 (-1.19%). Year-to-date, HPE has declined -23.25%, versus a 17.59% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...