Hewlett Packard Enterprise Co. (NYSE:HPE) should perform well as it approaches Wednesday’s third-quarter earnings report for four reasons, according to an analyst: demand for artificial intelligence, recovery in infrastructure, networking equipment demand and shares trading cheaply.

“The combination of the above leads us to believe that the set up for HPE shares is positive into the print with a greater likelihood of upward revision to estimates from the upcoming print,” JPMorgan analyst Samik Chatterjee wrote in a Tuesday note. JPMorgan has no rating on Hewlett Packard Enterprise.

AI demand “continues to be robust,” traditional IT hardware is recovering with peers reporting sharp rise in demand for traditional servers, networking equipment demand is on the upswing and HPE’s stock is trading at an “inexpensive” multiple of 10 times earnings, the analyst said.

JPMorgan forecasts third-quarter revenue of $7.75 billion compared to Wall Street consensus estimate of $7.661 billion, according to Benzinga Pro. JPMorgan expects earnings per share of 48 cents, one penny more than the consensus estimate.

“We expect the strength to be led by upsides in AI server revenues as well as sequential growth in both Hybrid Cloud and Intelligent Edge helped by recoveries in traditional infrastructure demand following a period of digestion,” Chatterjee said.

JPMorgan also raised forecasts for fourth-quarter revenue to $8.21 billion versus a consensus of $8.14 billion and fourth-quarter EPS of 56 cents compared to a consensus of 54 cents. This figure will be “largely led by better demand recovery — which includes both shipments and pricing — in General Purpose Servers,” the analyst said.

JPMorgan predicts full-year 2024 EPS of $1.95 for HPE, putting it at the high end of earlier guidance that ranged between $1.85 and $1.95.

HPE Price Action: Hewlett Packard Enterprise was down 1.6% at $19.07 as of Tuesday’s early afternoon trading. Exchange-traded funds that hold the stock saw both gains and losses.

First Trust S&P 500 Diversified Dividend Aristocrats ETF (NASDAQ:KNGZ) slipped 0.79%.
First Trust S&P 500 Diversified Free Cash Flow ETF (NYSE:FCFY) gained 1.06%.
IShares Focused Value Factor ETF (NYSE:DIVL) fell 1.2%.
IShares Focused Value Factor ETF (NYSE:FOVL) picked up 0.79%.
Fidelity Cloud Computing ETF (BATS:FCLD) dropped 1.87%.

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