By Samrhitha A
(Reuters) – Shares of Hewlett Packard Enterprise Co slumped more than 10% on Wednesday as its lackluster revenue forecast fanned worries of a slowdown in cloud spending this year.
The company was set to shed nearly $2 billion in market value if losses hold through the session. They have lost about 3% this year as of last close, failing to benefit from a broader rebound in tech stocks.
Brokerages expect economic uncertainty to weigh on demand for HPE’s server and storage systems and led six analysts to cut their price target. Their median view fell to $17, which is about 10% higher than the last closing price of $15.52.
Faced with the possibility of a recession, businesses have dialed back cloud spending and delayed large orders, sparking a slump in the tech sector after the pandemic-led boom.
“We believe the traditional server/storage markets will be most impacted by the challenging macro backdrop,” analysts at Barclays said.
Hewlett Packard Enterprise on Tuesday projected third-quarter revenue to be between $6.7 billion and $7.2 billion, below estimates of $7.24 billion and missed sales expectations for the second quarter.
Its stock now trades at around seven times Wall Street’s average earnings estimates for the next 12 months. That is lower than the average of 17.1 for the tech sector, according to Refinitiv.
Some analysts said the AI boom could help the company, after it signaled that rising customer inquiries about the tech were expected to turn into orders over the coming months.
“As businesses scale AI models, HPE is the undisputed industry leader and has considerable growth potential,” said Shejal Ajmera, director at India-based research firm CrispIdea.
(Reporting by Samrhitha Arunasalam in Bengaluru)
