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HP Enterprise Higher as Zerto Deal Prompts Analyst Praise

HP Enterprise shares rose as analysts reacted positively to its agreement to acquire Zerto, a cloud data management company, for $374 million.

Hewlett-Packard Enterprise  (HPE) - Get Hewlett Packard Enterprise Co. (HPE) Report shares rose Thursday as analysts reacted positively to its agreement to acquire Zerto, a cloud data management and protection company, for $374 million.

“This acquisition expands HPE GreenLake [HPE’s cloud platform] and continues to deliver on HPE Storage’s shift to a cloud-native, software-defined data services business,” HPE, a provider of IT equipment and services said.

Its shares recently traded at $14.78, up 1.4%, and have gained 25% over the past six months.

As for the analysts, Morgan Stanley rates HPE equal weight with an $18 price target.

The purchase “builds out GreenLake with disaster recovery capabilities, improves the financial profile of HPE’s storage business” and will accelerate HPE’s recurring revenue growth, Morgan Stanley analysts said, according to Bloomberg.

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Wells Fargo Securities rates HPE overweight with a price target of $18.

Though the Zerto acquisition is small, it “reflects HPE’s strategy to continually build out their software capabilities,” wrote analyst Aaron Rakers, Bloomberg says.

The deal represents “a positive expansion/example of HPE’s focus on driving a richer/higher-margin as-a-service mix.”

Evercore ISI rates HPE in line with a price target of $16. The transaction “will meaningfully contribute to HPE’s storage revenue growth profile,” Evercore said, according to Bloomberg.

Last month, HPE reported that it swung to a profit in the fiscal second quarter ended April 30 from a year-earlier loss on 11% higher revenue.

The figures largely exceeded the estimates of Wall Street analysts. GAAP profit in the fiscal-third-quarter outlook came up short of expectations.