Expect Hewlett Packard Enterprise Shares To Stay Under Pressure Near Term

Barclays expects shares of Hewlett Packard Enterprise Co (NYSE: HPE) to remain under pressure near term following mixed quarterly numbers, as the remaining co’s assets such as servers, storage and networking are exhibiting signs of growth challenges.

Quarter Print

Hewlett Packard Enterprise reported fourth-quarter revenue at $12.48 billion, below the consensus forecast of $12.82 billion, due to weak enterprise service segment. However, the EPS of $0.61 marginally topped the consensus expectation of $0.60, driven by improved margins.

Guidance

For the first quarter, the company guided non-GAAP EPS of $0.42–$0.46, with the high end in line with the consensus.

“The silver lining was that operating margin improved more than 200 bps, which is likely a crowd pleaser ahead of the CSC-related services spin-off,” analyst Mark Moskowitz wrote in a note.

Enterprise Services

But, enterprise services across the sector remain lackluster. Last week, Cisco Systems, Inc. (NASDAQ: CSCO) ushered in some cautionary warning signs. Now it is HP Enterprise.

Analyst's View

“In our view, accelerating declines in HPE's Enterprise Group is not likely a company-specific issue. It is more of a legacy vendor thorn, which could mean the self-help stories not able to pursue spins or splits may become less attractive to investors,” Moskowitz highlighted.

In the October quarter, HPE’s servers, networking, and storage revenue declined 6.6 percent, 33.8 percent and 4.9 percent, respectively. The analyst warned that those figures are not good for remaining company as well as for International Business Machines Corp. (NYSE: IBM), NetApp Inc. (NASDAQ: NTAP)and other legacy vendors.

At last check, shares of Hewlett Packard Enterprise had risen 1.42 percent on the day to $23.19. The analyst has an Underweight rating on the stock, with a target price of $18.

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