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Today's Hewlett Packard Enterprise Might Be 2012's HP

Today's Hewlett Packard Enterprise Might Be 2012's HP
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Bernstein’s Toni Sacconaghi, Jr maintained an Outperform rating for Hewlett Packard Enterprise Co (NYSE: HPE), with a price target of $19. He mentioned that the company seems to be what HP Inc (NYSE: HPQ) was in 2012, with “potentially much running room” for its stock.

In several ways, the set-up for Hewlett Packard Enterprise is similar to that for HPQ before the company split up. HPQ’s shares troughed at $12 and rose to $40 between November 2012 and December 2014, analyst Toni Sacconaghi noted.

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

He explained that the parallels between the two companies were:

  • Both stocks were “extremely inexpensive” at their troughs
  • HPQ recorded revenue declines in seven of nine quarters during revaluation, suggesting that revenue growth was not “a pre-cursor for a re-rating”
  • Improvement in free cash flow was the main driver of HPQ's re-rating. HPQ was able to improve FCF from $5 billion to $11 billion. Sacconaghi expects Hewlett Packard Enterprise’s FCF can improve from $1 billion to $3.5 billion, mainly on the back of margin expansion at Services
  • HPQ laid off 30,000 employees, while Hewlett Packard Enterprise has plans to downsize by a similar number.

“We see HPE as a "self-help story" at a very attractive price. Despite recent run-up, we see further potential upside,” the analyst commented.

Latest Ratings for HPE

Feb 2017ArgusDowngradesHold
Feb 2017BMO CapitalDowngradesOutperformMarket Perform
Jan 2017GuggenheimInitiates Coverage OnNeutral

View More Analyst Ratings for HPE
View the Latest Analyst Ratings

Posted-In: Bernstein Toni SacconaghiAnalyst Color Long Ideas Reiteration Analyst Ratings Tech Trading Ideas Best of Benzinga


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