UPDATE: BofA Securities Downgrades HP Enterprise (HPE) to Neutral; Backlog at Risk
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BofA Securities analyst Wamsi Mohan downgraded HP Enterprise (NYSE: HPE) from Buy to Neutral with a price target of $16.00 (from $19.00), saying the large backlog creates risks.
The analyst commented, "Given a worsening supply chain due to recent China lockdowns (negative commentary from Cisco, continued logistical challenges from protracted lockdowns), we expect negative estimate revisions and we are incrementally worried about order deceleration. We see some risk to HPC revs from slower customer acceptance and associated margin pressure. We move our rating to Neutral and our PO to $16 (from $19) on 8x C23 EPS (prior 9x C22 EPS). We roll over to C23-based valuation. Our Neutral rating is based on risk-reward balance: positives include mix shift to high-margin software/SaaS (software as a service) revs and optionality linked to H3C put balanced by risk from economic slowdown, component shortages & high backlog, which is cancellable. Upside risks: macro/supply chain recovery. Downside risks: longer slowdown, increased competition."
Shares of HP Enterprise closed at $15.04 yesterday.
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