Jefferies’ Analyst Raises PT on Hewlett-Packard Enterprise (HPE)

By Carrie Williams

Price Target is Raised on HPEShare prices of popular technology provider Hewlett-Packard Enterprise (NYSE: HPE) have climbed by more than 5% in the past three days and are currently trading very near to its 52-week high of $23.55. Jefferies’ analyst James Kisner today reaffirmed the Buy rating on the company and raised his price target from $27 to $29. The new PT is now an upside of 24.83% from the current price of $23.23.

The brokerage firm believes that the shares of HPE are vastly undervalued and reflect an overly bearish outlook for the end markets of the company. Kisner expressed confidence that once investors grow comfortable with the revenue and free cash flow outlook as well as the pending spin-out transactions of HPE, the shares would be re-rated to indicate a bullish bias.

Consequently, James Kisner updated the HPE model to reflect the latest guidance for HPE given at their analyst day (October 18th), as well as the spin-outs of the Enterprise Services and Software businesses. Kisner updated the estimates for FY’17 with an EPS of $1.50 and FCF of -$1.75 billion (vs HPE’s analyst day guidance of $1.50 and -$1.8 billion, respectively). For FY’18, Kisner anticipates an EPS of $1.32 and FCF of $2.00 billion (vs HPE’s analyst day guidance of $1.30 and $2.25 billion, respectively). For now, the vision of HPE CEO Meg Whitman seems to be shaping up in the right manner, as seen by the formulation of a leaner, more nimble company that is able to quickly react to market changes as well as opportunities as they come up.

HPE had recently finalized the buyout of SGI at $7.75 per share and the union is expected to enhance prospects in cyber security, weather, mapping, genomics research as well as life sciences fields. The earnings are not expected to be impacted in full first year after the merger and are expected to become accretive later on. Meanwhile, the EVP of HPE Antonio F. Neri sold 107,934 shares of HPE at an average price of $23 in a transaction that occurred on Monday.

HPE has an overall rating consensus of Moderate Buy with a $24.13 average analyst price target, according to data complied by TipRanks.