Seeing myriad risks ahead for enterprise hardware spending, Bank of America Global Research analyst Wamsi Mohan cut his ratings on both HP Enterprise and
to Neutral from Buy, sending both stocks lower on Friday.
Mohan points to four risks, none of which should be a particular surprise. His list includes a potential U.S. recession, a slowdown in demand in Europe related to the Russia-Ukraine war, Covid-related shutdowns in China, and continued component shortages and supply-chain disruptions.
Earlier this week,
(ticker: CSCO) posted weaker-than-expected results and guidance for its April quarter, due to a combination of suspended business in Russia and a shortage of power supplies and other parts, largely due to ongoing Covid-19 restrictions in Shanghai.
Both HP Enterprise (
) and Pure Storage (PSTG) are scheduled to report April quarter results after the close of trading on June 1.
For HP Enterprise, which provides networking and computing hardware, Mohan cuts his target price to $16, from $19. The analyst thinks there is a risk that HP will pare its earnings outlook, and he cites worries about order deceleration, in particular in the company’s high-performance computing segment, which includes the old Cray supercomputer business. HP Enterprise has projected profit for the April quarter of between 41 and 49 cents a share on a non-GAAP basis. For the fiscal year ending in October, HPE has projected revenue adjusted for currency to be up 3% to 4%, with non-GAAP profit of between $2.03 and $2.17 a share.
Regarding Pure Storage, which provides memory systems and services to enterprise customers, Mohan writes that he is “cautious on demand trajectory over the next several quarters,” after checks with resellers found that “confidence in storage spending is turning lower.” Pure has projected revenue for the fiscal first quarter ended in April of $520 million; the company sees full-year revenue of $2.6 billion. Mohan trims his target price on Pure shares to $27, from $34.
Mohan also trims his target price on NetApp (NTAP) to $75, from $96, while keeping the Neutral rating. The analyst maintains his Buy rating on Dell Technologies (DELL) shares, but trims his target price to $65, from $76.
Both HP Enterprise and Pure Storage shares are down more than 7% on Friday.
Barron’s has approached both companies for comment.
Write to Eric J. Savitz at [email protected]