Macquarie Sees Cause For Optimism On HP Enterprise Shares Ahead Of Q2 Earnings

Loading...
Loading...

Macquarie Capital's Rajesh Ghai reiterated his Outperform rating and a price target of $22 for Hewlett Packard Enterprise Co. 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 Thursday 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.

Loading...
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorNewsReiterationAnalyst Ratings
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...