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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 2016CLSAInitiates Coverage OnUnderperform
Sep 2016Wells FargoDowngradesOutperformMarket Perform
Sep 2016BarclaysMaintainsUnderweight

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Posted-In: Analyst Color News Reiteration Analyst Ratings


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