Why I’m Buying Hewlett Packard Ahead of Earnings
Breadth is at 33% gainers, with new lows running better than two-to-one on Monday.
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We have very dreary action on Monday morning as the selling pressure that developed last week gains traction. Breadth is only 34% positive with the Russell 2000 (IWM) leading to the downside with a loss of 0.7%.
New lows are expanding fast, with 100 in the early going against 40 new highs. The Magnificent Seven is still helping to hold up the indices. There is a little strength in chips and oil but that is about it.
My best advice is don’t fight it and protect capital. If you are going to trade then it is important to be extremely selective.
Adding to Hewlett Packard Enterprise
One name I’m adding to is Hewlett Packard Enterprise (HPE). I would not typically play this in front of its earnings report Wednesday after the close, but the poor market action has reduced the risk enough to make it worthwhile.
I highlighted HPE earlier this month. It has transformed itself from a slow-growth legacy hardware company into a major player in enterprise data center infrastructure. The company sells the computing, storage and networking equipment that businesses use to run their operations locally, in the cloud, or some mix of both. The 2025 acquisition of Juniper Networks, which makes routers, switches, and AI-driven networking software, put HPE in the middle of the AI infrastructure buildout.
The pivot showed up in the results on June 1, when HPE reported fiscal second quarter revenue growing 40% year over year to $10.7 billion against a $9.79 billion estimate, with adjusted earnings of $0.79 per share versus $0.53 expected. Server revenue alone came in at $5.45 billion against expectations of $4.66 billion. Since then the company unveiled its ProLiant Compute DL394 Gen12 server, built on Nvidia’s (NVDA) Vera CPU for AI workloads, and landed a deal with Vultr, alongside Nvidia, to build large-scale AI data centers.
Valuation Is the Reason
Technology multiples generally remain elevated even after the recent pressure. HPE’s do not. Analysts project 54% earnings growth over the next twelve months, and the stock trades at a trailing multiple of 19 and a forward multiple of 12, which puts the forward price-to-earnings growth ratio at roughly 0.2. A reading below 1.0 is generally considered undervalued, and 0.2 suggests the market has not priced in the earnings acceleration now underway.
The average analyst target is $70. Bank of America raised its target to $82 from $80 this morning ahead of the report.
Shares have pulled back to the $50 area, which was the prior resistance level and is also where the 20-day moving average sits. I’m actively trading the name around the upcoming earnings report.
$1 Billion Battery Deal
I also want to mention NeoVolta (NEOV). This is a small battery play I have mentioned several times, and what caught my eye is that it is run by Ardes Johnson, who came over from Tesla (TSLA) where he was director of Americas sales and marketing for the energy products division and launched the partner channel for PowerWall and PowerPack.
The company announced on Monday morning a supply agreement with Korea’s SK On for 9 gigawatt-hours of lithium iron phosphate battery cells over five years, from 2027 through 2031. The deal is valued around $1.09 billion with an additional 9 gigawatt-hours possible later. SK On will be the primary cell supplier to NeoVolta Power, producing the cells at its U.S. plant.
This illustrates that NeoVolta is going to be a serious player. The stock is up 21% on Monday morning and I’m expecting more news flow here soon.
At the time of publication, DePorre was long HPE and NEOV.
