Bank of America Takes a Bullish Stance on These 2 Stocks

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The Federal Reserve’s FOMC committee will meet today, and with the pace of inflation down to an annualized rate of 2.5%, the conventional wisdom expects the central bank to start cutting rates. The Fed has held its key funds rate at the 5.25% to 5.50% range since July of last year, in response to a generational spike in inflation.

Most Fed watchers are predicting that the bank’s governors will approve a cut of 25 basis points, or 0.25%. While modest, that would mark the end of a 14-month tight money policy.

For Bank of America, the Fed meeting is likely to provide a catalyst to the markets. “This week, the Fed is expected to officially start its cutting cycle after its longest hold at the peak of a hiking cycle in its history,” the bank’s equity strategist, Ohsung Kwon, noted. “We expect the Fed to cut rates by a typical 25bp, but markets see a relatively high likelihood of a 50bp cut. In our view, the data do not warrant a 50bp cut as activity remains healthy. That said, the market uncertainty over 25bp or 50bp means that the meeting will be a trading catalyst…”

Meanwhile, against this backdrop, Bank of America analysts are bullish on two particular stocks, forecasting double-digit upside potential for each. We’ve used the TipRanks database to see if these picks align with Wall Street analysts’ views. Let’s take a closer look.

Hewlett Packard Enterprise (HPE)

The first stock on our BofA-backed list is Hewlett Packard Enterprise, a company spun off from Hewlett-Packard in 2015. HPE inherited its parent company’s server, storage, and networking businesses, and took them public on its own hook. The company now provides a range of solutions, for everything from data collection and intelligence, to data security, to edge-to-cloud computing, to hybrid cloud operations. These are all services in high demand from AI companies and developers – and the boom in AI promises a boon to HPE.

In a transaction that is sure to garner plenty of attention, HPE is in the process of completing its acquisition of Juniper Networks. The $14 billion deal is expected to bring advantages to HPE’s cloud and AI-native networking capabilities, and to be accretive to earnings in the first year post-close. The Juniper deal is expected to finalize before the end of this year.

At the beginning of this year, HPE brought on board a new CFO, Marie Myers, who had previously served at the firm’s parent company. Myers has a reputation for pushing innovation and performance, and her remit with HPE includes cutting costs and improving efficiency.

On the financial side, HPE’s strong AI product lines, and an ongoing cyclical improvement in the AI sector’s outlook, proved to be a revenue driver in the recently reported fiscal 3Q24 (July quarter). The company’s top line was up just over 10% year-over-year, to reach $7.7 billion, and beat the estimates by $40 million. At the bottom line, HPE realized a profit of 50 cents per share in non-GAAP measures, a figure that was 3 cents per share ahead of the forecast.