Hewlett Packard, NetApp Better Positioned To Sidestep Tariff Headwinds Ahead of Earnings: Analyst

JPMorgan analyst Samik Chatterjee anticipates conservative earnings reports from hardware companies like Dell and HP, citing demand uncertainty and tariff risks. While raising price targets for Dell (DELL) to $111 and HP (HPQ) to $30 based on near-term strength, Chatterjee expects stock performance to hinge on investor perception of management's risk mitigation strategies for the second half of the year; Hewlett Packard Enterprise (HPE) and NetApp (NTAP) are viewed as better positioned to weather headwinds.

Analysis

JP Morgan analyst Samik Chatterjee anticipates a period of conservative earnings reports from hardware companies, primarily due to persistent demand uncertainty and the re-emergence of tariff risks. Despite these headwinds, price targets for Dell Technologies (DELL) have been revised upwards from $108 to $111 and for HP Inc. (HPQ) from $29 to $30, reflecting expectations of solid near-term performance. Dell is projected for 6% year-over-year revenue growth to $23.6 billion in its upcoming first quarter, driven by robust PC and server demand, particularly from less macro-sensitive AI spending and stronger-than-expected AI market share, which are seen offsetting broader macroeconomic moderation; however, the tariff landscape remains a key concern for second-quarter guidance and the fiscal 2026 outlook. HPQ is expected to report a strong second-quarter result, supported by PC demand likely pulled forward ahead of potential tariff-driven price hikes with limited margin pressure, but the sustainability of these gains is questioned due to macroeconomic uncertainty and challenges in navigating higher tariffs and uncertain PC demand in the second half of fiscal 2025. In contrast, Hewlett Packard Enterprise (HPE), with projected revenue of $32.4 billion reflecting 8% year-over-year growth, and NetApp (NTAP) are viewed as better positioned to navigate these anticipated challenges. HPE's favorable near-term outlook is attributed to its guidance already factoring in an AI server revenue slowdown and a higher tariff burden than peers, alongside potential upside from stronger networking demand. NetApp is expected to demonstrate stable demand leading to a slight revenue beat in F4Q25E, with FY26 revenue growth projected in the low-to-mid single digits due to a muted macro environment, though EPS is anticipated to exceed consensus due to resilient gross margins and better operating discipline, potentially driving its valuation multiple back to recent year averages. Chatterjee emphasizes that stock movements for these companies will likely depend on investor interpretations of management's strategies to either de-risk second-half performance or contain expectations for potential full-year downside.

Key Decisions for Investors

• Investors in Dell Technologies should closely monitor management's commentary on the impact of tariffs on second-quarter guidance and the fiscal 2026 outlook, weighing this against the strong AI-driven demand and recent price target increase.
• For HP Inc., it is prudent to assess the sustainability of the PC demand pull-forward into the second half of fiscal 2025 and the company's strategy for managing heightened tariff risks and macroeconomic uncertainty, despite the near-term positive outlook and raised price target.
• Hewlett Packard Enterprise warrants consideration for its relatively resilient near-term outlook, as its guidance already incorporates anticipated AI server revenue slowdowns and higher tariff burdens, with potential upside from the networking segment.
• NetApp investors should evaluate the potential for valuation re-rating towards its historical 14x-15x multiple if it achieves expected EPS outperformance driven by gross margin resilience and operational discipline, despite modest top-line growth forecasts.
• Across the hardware sector, upcoming earnings calls will be crucial for gauging management's effectiveness in de-risking second-half performance and addressing demand and tariff uncertainties, as these factors will likely dictate stock movements more than headline results.