HPE’s Q2 results
HP Enterprise (HPE) reported better-than-forecasted earnings but lagged revenue estimates in the second quarter of fiscal 2019. Improved margins and stock buybacks drove the company’s profits. Margins were driven by lower DRAM and flash memory prices and the company’s efforts to cut down its costs.
However, the trade war fears have resulted in lower sales in China, which along with weakness in sales execution issues in North America continue to be headwinds.
After the earnings results, out of the 21 analysts covering HPE, five analysts have recommended a “buy” on the stock, while 12 have rated the stock a “hold.” Four analysts have given the stock a “sell.” Analysts have set a target price of $17.72 for the stock, which implies a premium of 23.1% based on its closing price of $14.39 on May 24. On May 24, only Morgan Stanley has raised its price target to $17 from $16 on HPE stock, probably on the raised outlook for fiscal 2019.
However, many analysts have slashed their price targets on HPE stock after it missed its revenue estimates. These analysts are probably cautious over the declining top-line trend, foreign currency headwinds, and pressure due to the exit of the Tier 1 space. The analysts who have cut the price target on HPE are as follows:
- Instinet to $17 from $20
- Susquehanna to $16 from $17
- J.P. Morgan to $16 from $17