BofA Securities has adjusted its stance on shares of HP Enterprise (NYSE: HPE), shifting from a Neutral rating to a Buy with a new price target set at $24.00, up from the previous $21.00.
The revision comes as the firm sees multiple opportunities for the company, including significant cost reductions and a cyclical recovery in various segments.
The upgrade is partly attributed to the new Chief Financial Officer, Marie Myers, whose successful track record at HP Inc (NYSE:HPQ). is expected to drive substantial cost cuts at HP Enterprise.
BofA Securities also anticipates a cyclical recovery across HP Enterprise's servers, storage, and particularly networking sectors.
Additionally, the firm foresees revenue and increased cost synergies following the upcoming acquisition of Juniper, which is expected to contribute positively to HP Enterprise's financials. The High Performance Compute (HPC) segment is also projected to see margin recovery from previously depressed levels.
The analyst highlights HP Enterprise as a potential beneficiary of the growing demand in Enterprise and Sovereign markets for Artificial Intelligence (AI) solutions.
The new price objective of $24 is based on a 10 times multiple of the projected pro-forma EPS of $2.40 for the calendar year 2026.
In other recent news, Hewlett Packard Enterprise Co (NYSE:HPE) has reported a 10% year-over-year increase in third-quarter fiscal year 2024 revenue, reaching $7.7 billion.
The company's AI system revenues reached $1.3 billion, marking a 40% increase from the previous quarter. However, the Hybrid Cloud and Intelligent Edge segments saw year-over-year revenue declines of 7% and 23% respectively.
HPE has also provided new financial details related to its merger with Juniper Networks (NYSE:JNPR), as indicated in a recent SEC Form 8-K filing. The filing details the completion of the merger agreement and includes audited and unaudited financial statements of Juniper, as well as pro forma financial information post-merger.
Loop Capital Markets recently adjusted the price target for HPE shares, raising it to $18 from the previous $16, while BofA Securities reduced its price target to $21 from $24. Both firms maintained a neutral rating on the stock. These adjustments come amid recent developments such as HPE's acquisition of Juniper Networks and the sale of part of its equity in H3C.
InvestingPro Insights
As HP Enterprise (NYSE:HPE) garners a more optimistic outlook from BofA Securities, InvestingPro data further enriches the narrative surrounding the company's financial health and market position. With a market capitalization of $22.38 billion, HPE is trading at a P/E ratio of 12.18, which is considered low relative to its near-term earnings growth. This is supported by an adjusted P/E ratio for the last twelve months as of Q3 2024 at 10.93, indicating a potentially undervalued stock, especially when paired with the company's strong free cash flow yield as implied by its valuation.
InvestingPro Tips highlight HPE's prominence in the Technology Hardware, Storage & Peripherals industry, coupled with its consistent dividend payments over the past decade, illustrating a commitment to shareholder returns. The company's profitability over the last twelve months and analysts' predictions of continued profitability this year reinforce the company's stable financial status. It's worth noting that while some analysts have revised their earnings downwards for the upcoming period, the overall financial data suggests resilience.
For those seeking deeper insights, there are additional InvestingPro Tips available, which can provide further guidance on HPE's performance and potential investment opportunities. Readers interested in exploring these tips can find them on the InvestingPro platform.
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