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In a report published Thursday, Deutsche Bank analyst Sherri Scribner offered three reasons why shares of Hewlett-Packard Company (NYSE: HPQ) remain "attractively valued" with catalysts this year that will boost shares higher.
"Hewlett-Packard remains one of our favorite stocks this year based on the positive catalyst of the split, a low valuation, and the underappreciated enterprise business," Scribner wrote. "Last week's results further strengthened our view, and we expect next week's annual Discover customer event in Las Vegas, and the July filing of separate financials for the two companies to be additional catalysts as we move toward the final split in the fall."
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1. Split Unlocks Value
According to Scribner, splitting the company in two is a logical move as the consumer facing PC and printer business has "very limited" synergies with the Enterprise segment. Negative synergies of $400 million to $450 million are less than investors had expected and will be offset by fiscal 2017, according to the analyst.
Related Link: Hewlett-Packard Earnings: The Good...And The Bad, According To Wells Fargo
2. Cheapest Tech Stock In The S&P 500
Scribner argued that on a P/E basis, shares of Hewlett-Packard are the cheapest tech stock in the S&P 500 with a 9x forward earnings and trading at 10x the analyst's fiscal 2017 free cash flow estimates. As such, shares are not reflecting future catalysts or the company's "solid" position as a leading technology provider.
3. Enterprise An Underappreciated Story
Finally, Scribner stated that Enterprise margins continue to improve with no signs of easing up over the next few years driven by improvements in the Service business. In addition, the company is well positioned to compete in key segments including cloud, Big Data and converged infrastructure.
Analyst Rating and Price Target
Shares remain Buy rated with an unchanged $45 price target, based on a 12x multiple (in line with the company's historical average multiple and peers) on the analyst's fiscal 2016 earnings per share estimate of $3.85.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.