BofA/Merrill Lynch Reinstates Hewlett-Packard (HPQ) at Buy on Upcoming Split

BofA/Merrill Lynch reinstates coverage on Hewlett-Packard (NYSE: HPQ) with a Buy rating and a price target of $47.00, saying the upcoming split will unlock value.

Analyst Wamsi Mohan cited "(1) the impending split into HP Inc. and Hewlett-Packard Enterprise makes it attractive for investors to own the stock before the transaction occurs in F15 for the optionality to later continue to own one or both of these pieces (two very different markets, strategies, capital structures and shareholder returns policy); (2) our sum-of-the-parts (SOTP) analysis shows that the enterprise value of the separate companies added together is worth more than that of the combined enterprise; and (3) multiple should expand on significant leverage from further cost cutting (esp. in Services). In our view, the current valuation is attractive at 9x C16E EPS (6x ex cash)."

The firm values HP Enterprise at $30 per share and and HP Inc.at $17 per share.

For an analyst ratings summary and ratings history on Hewlett-Packard click here. For more ratings news on Hewlett-Packard click here.

Shares of Hewlett-Packard closed at $38.47 yesterday.

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