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Evercore ISI downgraded shares of Hewlett Packard Enterprise (NYSE:HPE) to In Line from Outperform in a note to clients Thursday, leaving its target price unchanged at $18 a share.
The firm’s analysts said the downgrade is partly due to the fact the stock is “now within range of our target.” HPE shares are trading at $16.56 at the time of writing, after a more than 2% fall in Thursday’s session.
The firm’s Neutral view is based on four factors, including moderating IT spending, its strong backlog, FY23 expectations compared to peers, and the fact they believe the server market will moderate.
“We expect global IT spend will moderate but still grow in the range of 3-5% y/y (ex-Telecom Services) in CY23. Furthermore, we think budgets will remain more muted in H1 before improving in H2. HPE, like many of its peers, has noted that budgeting and order processes have worsened vs. a few quarters ago. However, HPE has had relatively better order momentum/pipeline vs. peers,” said the analysts.
On the FY23 expectations compared to peers, the analysts said: “Worth noting HPE is expecting for sales to be up 2-4% in FY23 vs. peers like DELL that are implying sales to be down close to 10% for (ISG segment modelled down 4%). This we think could create some risk to FTM estimates especially if backlog starts to degrade (though networking will be an offset).”
