Wells Fargo Upgrades Hewlett-Packard (HPQ) to Outperform; Number Of Potential Catalysts
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Price: $28.13 --0%
Rating Summary:
16 Buy, 20 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 15 | Down: 17 | New: 4
Rating Summary:
16 Buy, 20 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 15 | Down: 17 | New: 4
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Wells Fargo upgraded Hewlett-Packard (NYSE: HPQ) from Market Perform to Outperform and raises its valuation range to $30-$32 from $23-$25. The firm sees a number of potential catalysts.
The upgrade is predicated on 1) HP's ability to deliver FY14 net income and free cash flow (FCF) growth even absent revenue growth due to mix & cost alignment (not unlike the Dell and IBM stories over the past few years), 2) divestitures that could accelerate HP’s target of getting to net debt zero, which could, in turn, drive greater returns to shareholders, 3) potential for shareholder activism (driving divestitures) – standstill with Ralph Whitworth comes to an end inside the next year, 4) potential for multiple expansion from current 7x if HP delivers (and returns) FCF growth (HP’s FCF yield is 17%).
"While we do not believe HP is completely "out of the woods" (needs to ramp new products, improve sales efficiency and go-to-market), we believe the risk/reward is favorable given a more solid foundation to grow off, initial new product interest, mix benefits to margins, and potential shareholder activism/divestitures," analyst Maynard Um states.
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 $25.43 yesterday.
The upgrade is predicated on 1) HP's ability to deliver FY14 net income and free cash flow (FCF) growth even absent revenue growth due to mix & cost alignment (not unlike the Dell and IBM stories over the past few years), 2) divestitures that could accelerate HP’s target of getting to net debt zero, which could, in turn, drive greater returns to shareholders, 3) potential for shareholder activism (driving divestitures) – standstill with Ralph Whitworth comes to an end inside the next year, 4) potential for multiple expansion from current 7x if HP delivers (and returns) FCF growth (HP’s FCF yield is 17%).
"While we do not believe HP is completely "out of the woods" (needs to ramp new products, improve sales efficiency and go-to-market), we believe the risk/reward is favorable given a more solid foundation to grow off, initial new product interest, mix benefits to margins, and potential shareholder activism/divestitures," analyst Maynard Um states.
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 $25.43 yesterday.
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Ralph V. Whitworth, Wells FargoSign up for StreetInsider Free!
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