HP Enterprise Offers Compelling Valuation; Jefferies Lifts Price Target To $27

Citing compelling valuation, Jefferies maintains its Buy rating and raised the price target by $2.75 to $27 on Hewlett Packard Enterprise Co (NYSE: HPE), despite the company reporting "messy" third-quarter results.

The company's third-quarter results included light revenue and a low-quality EPS beat. The company guided fourth-quarter EPS of $0.605, roughly in line with the consensus of $0.61.

Related Link: Hewlett-Packard Enterprise's Spinoff Leaves Remaining Company On "Wrong Side Of The Cloud"

In addition, HP Enterprise announced it intends to spin out most of the software business to a new entity combined with U.K.-based Micro Focus.

HP Enterprise trades at 2.5x on an EV/CY17E EBITDA basis when omitting the impact of the services and software spins (and ex-FS debt), below the group average of 6x. Jefferies' $27.00 target is based on 6x EV/CY17E EBITDA (ex-services and software).

"We continue to believe HPE shares offer a compelling valuation and will continue to rise as investors become more comfortable with HPE's revenue and free cash flow outlook," analyst James Kisner wrote in a note.

At time of writing, shares of HP Enterprise fell 2.72 percent to $21.49.

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