Brean Capital Sees Attractive Current Valuation For Hewlett-Packard

In a report published Wednesday, Brean Capital analyst Ananda Baruah reiterated a Buy rating and $45.00 price target on

. In the report, Brean Capital noted, “We reiterate our Buy rating and $45 TP following our investor dinner yesterday with HPQ's Andrew Simanek (Director, Investor Relations), as we believe there is material opportunity for additional cost savings following the split transaction. In fact, we believe ongoing cost savings could make for normalized EPS growth beyond the initial split dis-synergy period, which we conservatively assume would mean EPS growth in '17 is increasingly likely. Bearing that L-T cost savings context in mind, in conjunction with a strong commitment to capital return both pre-split and post-split (with a heavier emphasis on “HP Inc.”), we believe HPQ stock remains attractive at current levels (~9.5x our '15 EPS of $3.97). "Additionally, we believe HPQ's FY'15 EPS guidance of $3.83-$4.03 to be conservative, underpinned by the confluence of: 1) '15 Operating Margin expansion in most segments (from '14 cost actions), and 2) anticipated Services stabilization (both top and bottom line), from a constructive signings pipeline as well as a continued normalization of margins to 4%-6% from cost savings and mix. Our $45 TP is based on the low end of our ‘base-case' sum-of-the parts valuation, which suggests a valuation of $45 - $50.” Hewlett-Packard closed on Tuesday at $38.20.