Macquarie Sees Cause For Optimism On HP Enterprise Shares Ahead Of Q2 Earnings
Macquarie Capital's Rajesh Ghai reiterated his Outperform rating and a price target of $22 for Hewlett Packard Enterprise Co. (NYSE: HPE).
"Sentiment on the name [Hewlett Packard] has plummeted over the past month following dismal results from several Enterprise IT players as reflected in the stock decline between April 1 and now" the analyst noted Monday morning. With net cash of $3.39 per share and shares trading at 6.5x FY16, Ghai believes it is an attractive entry point.
Three Points For Confidence In Hewlett Packard
There will be a constant currency revenue performance of the Enterprise Group in servers, storage, and networking, Ghai highlighted. This consists of 51 percent of HPE's revenue. "This segment is up 7% year over year in Q1FY16 and we look for a similar performance in Q2," Ghai noted.
- The Enterprise Services business will have a constant currency revenue performance as well. This segment makes up 36 percent of revenue. After a "long time" this segment was "flat year over year in Q1FY16" and Ghai is confident it will reach upwards toward the 7 percent exiting FY16 goal.
- The current $2 billion share buyback has "authorization and confirmation of intention to use the proceeds from H3C($2.3B) and MphasiS ($1B) sales to further enhance the capital return program in FY16," Ghai said. These assets sales could lift FY17 EPS by $0.18.
Latest Ratings for HPE
|Oct 2016||CLSA||Initiates Coverage On||Underperform|
|Sep 2016||Wells Fargo||Downgrades||Outperform||Market Perform|
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.