Hewlett Packard Enterprise Co (NYSE: HPE)’s first quarter results on February 23 may be a non-catalyst for the stock as investors wait for a clearer picture to emerge spin-offs.
However, Oppenheimer believes HPE's restructuring and refocusing, coupled with its M&A activity, will boost fundamentals into FY18.
Analyst Ittai Kidron expects results to trend roughly in line with consensus, with the possibility of minor top-line softness offset by solid operating margin.
“Our checks point to continued weakness in servers and switching, offset by traction in AFA storage and WLAN (Aruba). Demand continues to be impacted by macro and public cloud headwinds,” Kidron wrote in a note.
That said, the analyst don't expect a major top- or bottom-line miss as the challenges are well-known and reflected in guidance/expectations.
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On the M&A front, Kidron believes HPE is likely to make additional acquisitions along the lines of the recently announced SimpliVity, leveraging its robust post-spins cash balance.
In addition, the analyst said datapoints indicate the Enterprise Services and the Software spinoffs are on-track to close along their existing timelines.
Kidron maintained his Outperform rating and raised the price target by $2 to $27 on attractive valuation.
“In the meantime, we believe valuation remains attractive, with share repurchases and spin-off-related arbitrage both limiting NT downside risk,” Kidron added.
Latest Ratings for HPE
|Jan 2017||Guggenheim||Initiates Coverage On||Neutral|
|Nov 2016||BMO Capital||Maintains||Outperform|
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