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The company is shifting its business model towards membership services.
A dream time
Hewlett-Packard Initiative
shares struggled in 2020, falling more than 20% as investors rallied into computer growth stories. A provider of high-performance computing, enterprise storage, and network products, the industry has suffered the impact of tighter spending with corporate IT departments with a focus on moving key functions to the Internet.
But there are signs of a turnaround.
HP Enterprise Head (ticker: HPE) Antonio Neri has been engineering a move in the business model for all of the company’s offerings to membership services. In October, Neri set out a three-year plan to return to high-level growth. In a meeting with securities analysts, Neri said the company expects revenue growth on a cash-flow basis to be between 1% and 3% on a tight annual basis through 2023, with non- GAAP of 10% to 12%, and non-GAAP earnings per share growth of 7% to 9%.
JP Morgan analyst Paul Coster on Friday raised its stock rating to Overweight from Neutral, raising its target price to $ 16, from $ 13. The share price rose 0.5% to $ 12.55 in the early afternoon.
He said the company closed the year with “two exciting quarters,” progressed a cost cap program, spent $ 925 million to buy the network company defined by Silver Peak software, and it now goes into “getting over enterprise IT spending. in 2021 as we return to work. ”
Coster said in a research note that the stock “looks valuable in value, overlooked by the sales side, and feels like a long contrarian trade that could capture a rotating tail value, on strengthen it by developing free cash flow. ”
He said HP Enterprise is trading at less than eight times its 2021 non-GAAP profit estimate, 10% lower than three years meaning complex forward price / earnings. The discount, he said, is unjustified by the company’s improving fundamentals, shifts in growth segments, and a focus on cost containment.
“We see the Hewlett-Packard Initiative as not having enough value here; we expect a re-rating of continued stable performance, and we anticipate that this stock will outperform our broadcast averages in the next 6-12 months, ”he wrote.
Write to Eric J. Savitz at [email protected]