Hewlett Packard Enterprise Has Crazy Upside, But Didn't You Know That Already?

Bernstein's Toni Sacconaghi upgraded the rating for Hewlett Packard Enterprise Co HPE from Market-Perform to Outperform, while raising the price target from $16 to $19. While the stock seemed to offer very attractive upside potential, there had been concerns surrounding revenue and EPS estimates being too high, analyst Toni Sacconaghi said. He added, however, that the company had delivered the third consecutive quarter of positive revenue growth at constant currency. Hewlett Packard Enterprise indicated that it may reduce its share count by more than 10 percent over the next year and a half. The FY16 EPS guidance appears achievable, and the company seems poised for EPS growth in FY16 and FY17, Sacconaghi commented. "Moreover, while cash flow was absolutely abysmal in Q1, it has nowhere to go but up, and we believe the stock is likely to re-rate as cash flow improves," the analyst said, while adding that this is consistent with what happened with HP Inc HPQ through 2012 to 2014, "when the stock more than tripled off its low over the period of 24 months." Recently reported results by both eBay Inc EBAY and Paypal Holdings Inc PYPL are testament of the school of thought suggesting spun-offs often outperform the market. This school of thought is supported by a past study conducted by Purdue University faculty John J. McConnell and Alexei V. Ovtchinnikov. With more than 45 years of data, the study showed that new spinoffs beat the market by nearly 20 percent in their first 12 months of trading.