Hewlett Packard Enterprise (HPE) Stock Up, Oppenheimer Bullish

Hewlett Packard Enterprise (HPE) stock is gaining on Thursday afternoon as Oppenheimer lifted its price target on shares to $25 from $21 and reiterated its 'outperform' rating.
By Kaya Yurieff ,

NEW YORK (TheStreet) -- Shares of Hewlett Packard Enterprise (HPE) - Get Report are climbing 3.08% to $20.10 on Thursday afternoon as Oppenheimer raised its price target to $25 from $21 and reiterated its "outperform" rating.

The firm decided to take a closer look at the company's financial profile after its 2016 second quarter results and its decision to spin off its enterprises services unit and merge it with Computer Sciences Corp. (CSC).

"Our in-depth analysis suggests that post spin-off, HPE will enjoy a net cash position of $7.2 billion, representing 26% of its current market cap excluding ES, have ongoing annual FCF of about $3 billion (excl. charges), have an unchanged recurring profit profile, and trade at 2.8x EV/EBITDA and 0.6x EV/sales based on current valuation and our FY17 estimates," Oppenheimer wrote in an analyst note earlier today.

Based on its analysis, the firm believes the shares offer significant upside as the attractiveness of the remaining business becomes visible post spin-off.

Additionally, the spin-off of the enterprises services unit will result in a lower portion of HPE's revenue coming from recurring sources. But due to the low profitability of the segment, Oppenheimer believes the recurring profit profile should be relatively unchanged at about 52% of total profit.

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