Analyst Asiya Merchant from Citi reiterated a Buy rating on Hewlett Packard Enterprise and keeping the price target at $28.00.
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Asiya Merchant has given his Buy rating due to a combination of factors that highlight Hewlett Packard Enterprise’s (HPE) potential for growth and value. Despite a recent drop in share price following the FY28 EPS guidance, which was in line with Citi’s expectations but below broader investor hopes, Merchant sees this as a prudent outlook. The guidance reflects a conservative approach, particularly in the networking segment, which is expected to grow modestly in the near term but holds potential for faster growth as the company shifts focus to more dynamic areas like data center switching.
Merchant also points to HPE’s overall IT revenue growth prospects, driven by an increased mix of networking, cloud, and AI, alongside structural cost reductions and enhanced operating leverage. The company’s free cash flow is projected to exceed $3.5 billion by FY28, supported by dividend growth and share repurchases. Additionally, the networking segment is expected to benefit from market share gains and opportunities in data center AI networking. These factors, combined with a favorable valuation at 8x P/E F24M, underpin the Buy rating with a target price of $28.
In another report released today, Barclays also maintained a Buy rating on the stock with a $27.00 price target.