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How Do Analysts View Hewlett Packard Enterprise?

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Mar. 5 2018, Updated 7:31 a.m. ET

Loop Capital Markets upgrades HPE stock

On February 20, 2018, analyst Ananda Baruah from Loop Capital Markets upgraded the rating on Hewlett Packard Enterprise (HPE) to a “buy” from a “hold” and increased the stock’s 12-month price target to $21 from $14.5. Baruah attributed this upgrade to multiple catalysts that are expected to positively impact the stock’s performance over the next two to three years.

According to Baruah, investors have misinterpreted HPE’s analyst day presentation and expect the company’s long-term guidance to start from fiscal 2021, not fiscal 2019. Baruah expects the HPE Next program to result in significant cost savings for the company. These savings, coupled with share repurchases over the next few years, should positively affect HPE’s EPS (earnings per share) as well. HPE expects revenue growth in each of its business segments, while its Tier 1 Cloud vertical is also returning to revenue growth.

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Morgan Stanley also upgraded HPE last month

HPE’s stock price rose 14% in January 2018 after Morgan Stanley (MS) upgraded its rating on the company from “equal weight” to “overweight.” Morgan Stanley analyst Katy Huberty expects HPE to post earnings and revenue growth over the next few years. As we can see in the chart above, analysts expect HPE’s revenue to rise YoY in fiscal 2019 and fiscal 2020.

Huberty expects the recent tax reforms in the United States to drive an increase in IT (information technology) spending, which will benefit companies such as HPE. The stock has risen over 26.3% in 2018. Comparatively, the S&P 500 Index (SPY) and the PowerShares QQQ Trust, Series 1 ETF (QQQ) have generated returns of 2.9% and 8%, respectively, in 2018.

Out of the 27 analysts covering HPE, nine have recommended “buys” on the stock, while two have recommended “sells” and 16 have recommended “holds.” The average 12-month target estimate for HPE is $17.77 with a median estimate of $17.5, indicating that the stock is trading at a premium of 3.5% to analysts’ median estimates.

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