Hewlett Packard Enterprise (HPE): Raising PT Despite Weak Quarter - Jefferies
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Jefferies analyst, James Kisner, reiterated his Buy rating on shares of HP Enterprise (NYSE: HPE) after the company reported a messy Q3 with light revenue and a low-quality EPS beat. Q4 EPS guidance was in-line. As anticipated in press reports, HPE announced it intends to spin out most of the Software business to a new entity combined with UK-based Micro Focus.
The revenue shortfall was chiefly driven by Enterprise Group ($6.48B, Street = $6.85B), Software ($731M, Street = $811M), and Enterprise Services ($4.73B, Street = $4.80B). Within Enterprise Group, Networking (+12% Y/Y organically, c.c.) remained strong while Storage was notably weak (-5% c.c.). Servers declined (-2% c.c.). but EBIT ended up OK at $1.08B (Street = $1.06B) on better than expected gross margins (29.3%, Street = 28.8%) and lower than-expected opex ($2.49B, Street = $2.60B).
The analyst stated "We continue to believe HPE shares offer a compelling valuation and will continue to rise as investors become more comfortable with HPE's revenue and free cash flow outlook". The price target increases to $27.00 (from $24.25.
Shares of HP Enterprise closed at $22.09 yesterday.
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