We recently published a list of 10 Stocks That Will Go to the Moon According to Reddit. In this article, we are going to take a look at where Hewlett Packard Enterprise Company (NYSE:HPE) stands against the other stocks.
FINRA Investor Education Foundation and CFA Institute (2023) revealed that ~37% of Gen-Z investors in the US and ~38% in the UK come to social media influencers regarding investment decisions. Therefore, it is important to explore the role finfluencers (influencers sharing financial advice on social media) play in providing investment information and how Gen-Z investors engage with finfluencers. Young investors are considering memes and viral videos as the primary source of investment advice.
Social Media and Investments: Do They Complement Each Other?
Experts believe that retail or non-professional investors are now becoming dependent on digital channels, like social media platforms such as TikTok, when it comes to investing.
FINRA revealed that ~60% of US investors under age 35 believe that social media can be used as a source of investment information. This compares to ~57% who use finance professionals. This increase is probably because digital channels are becoming easily accessible, with ~60% of the global population utilizing social media (as per DataReportal).
Quick-scroll websites are now considered the go-to spot for investment ideas and inspiration. This is because of their bite-sized format and easy access. Ofcom, which tracks news consumption in the UK – revealed that TikTok’s reach for news went up from ~1% in 2020 to ~7% in 2022. This was mainly seen in younger folks aged between 16 – 24 years. Pew Research mentioned that, in the US, this increased from ~3% in 2020 to ~10% in 2022.
Financial advice content, which is shared on social media, has been contributing to the growth of the “creator economy,” which is pegged at ~$127 billion globally (as per Coherent Market Insights). This is expected to reach US$528.39 billion by 2030, with growth stemming from higher demand for user-generated content and increased monetization opportunities. Financial institutions and investment advisory companies are now focusing on creating pathways from social media to their product and services to exploit strong market opportunities. Therefore, most retail investors continue to make investing decisions under social media’s influence.
Retail Traders Making a Significant Portion in The US Stock Options
JPMorgan Chase & Co. highlighted that non-professional investors are now making a bigger part of the US options market as they continue to pour money mainly into short-term bets and technology stocks. The bank highlighted that retail traders accounted for ~18.3% of the total options activity in June. Social media and online investing communities have influenced retail investors to the extent that these investors don’t shy away from making investments in the downturn.
In late July and early August 2024, when there was a sharp decline in popular technology shares, retail investors turned out to be net buyers.
Vanda Research mentioned that individual investors, who were caught up in the market downturn, continued to be net buyers of shares of leading technology and AI-related companies. Just to balance out the risks, retail investors directed significant buying to an ETF tracking 20-Y Treasury bonds. Wall Street experts and enthusiasts believe that this confidence comes from the online investing communities and social media platforms, where there were discussions about going long on leading technology shares as they were trading at “decent levels.”
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A woman programmer in a modern office working with multiple computer servers.
Hewlett Packard Enterprise Company (NYSE:HPE)
Number of hedge fund holders: 58
Hewlett Packard Enterprise Company (NYSE:HPE) is a supplier of IT infrastructure products and services.
Hewlett Packard Enterprise Company (NYSE:HPE) saw its 3Q 2024 revenues jump by 10% YoY to $7.7 billion, beating the analysts’ expectations. This outperformance was supported by a surge in server revenue because of demand for artificial intelligence. The company’s edge-to-cloud strategy throughout networking, hybrid cloud, and Al should continue to act as a critical tailwind moving forward. Hewlett Packard Enterprise Company (NYSE:HPE) increased its full-year EPS outlook to $1.68 and $1.73 (from $1.61 to $1.71 previously). However, it maintained a revenue growth estimate of 1% – 3%.
Hewlett Packard Enterprise Company (NYSE:HPE) is well-placed to capitalize on the demand for Al servers, which has been picking up due to increased investments in Al infrastructure by businesses. Hewlett Packard Enterprise Company (NYSE:HPE)’s stock is well-placed to take off as its cyclical slowdown is ending, and Al-driven sales of its newer servers should help offset the weakness of other business segments.
Moving forward, the company’s expertise in designing, manufacturing, and running Al systems at scale should help it fuel the growth of cumulative Al system orders. This, together with prudent cost management and expectations of high FCF, should help Hewlett Packard Enterprise Company (NYSE:HPE) over the medium term.
Analysts at Bank of America upped their price objective on shares of Hewlett Packard Enterprise Company (NYSE:HPE) from $22.00 to $24.00, giving it a “Neutral” rating on 21st June. As per Insider Monkey’s 2Q 2024 database, 58 hedge funds were long Hewlett Packard Enterprise Company (NYSE:HPE).
Overall HPE ranks 4th on our list of stocks that will go to the moon. While we acknowledge the potential of HPE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than HPE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
