Raymond James: Hewlett Packard Enterprise Is A Nimbler, More Focused Company

Hewlett Packard Enterprise Co HPE investors appear unimpressed with the company’s focus on cash and profits rather than growth, according to Raymond James.

The Analyst

Analyst Simon Leopold maintains an Outperform rating on Hewlett Packard Enterprise.

The Thesis

Following Meg Whitman's departure and the appointment of technologist Antonio Neri as CEO, HP Enterprise has become a nimbler and more focused entity, Leopold said in a Monday note. (See his track record here.) 

The company now focuses on a diverse set of IT opportunities, the analyst said: servers constitute more than 40 percent of sales, and HP Enterprise enjoys the second-largest share of this market. Services account for around 25 percent of sales, while storage, Intelligent Edge and financial services contribute around 10 percent of sales each, he said. 

Many investors are focusing on servers, which is understandable, since this segment contributed $17.5 billion of the company’s total fiscal 2018 sales of $30.9 billion, Leopold said. Yet the other business segments appear underappreciated by investors, he said. 

HP Enterprise plans to reduce its exposure to web scale customers, since they represent lower margins and have no associated services, the analyst said. 

The company guided to $1.4-1.5 billion in free cash flow in fiscal 2019, which includes restructuring.

Although investors are skeptical, Raymond James considers HP Enterprise an “attractive cash flow story” and a “good choice for value-oriented investors.”

Price Action

Hewlett Packard Enterprise shares were down 0.14 percent at $14.20 at the time of publication Monday.

Related Links: 

Mid-Morning Market Update: Markets Open Lower; Hitachi To Acquire ABB's Power-Grid Unit

Hewlett Packard Enterprise Posts Q3 Beat: The Sell-Side Reacts