Bernstein on if HP Enterprise (HPE) is an AI play

Bernstein analyst Toni Sacconaghi reiterated an Outperform rating and $20.00 price target on HP Enterprise (NYSE: HPE).

"We struggle to see the potential source of differentiation for HPE’s AI public cloud. We were a little surprised that HPE announced it would enter the public cloud business, specifically for AI. Competition is formidable, and HPE lacks the account control/reputation of the Big 3 cloud providers or even IBM, as a bigger enterprise player. We note that HPE closed its Helion public cloud offering in January, 2016, due to very limited commercial traction. AI orders remain strong, and AI could be a catalyst for the stock...but there isn’t
sufficient disclosure to determine how much of a net step up we might see to HPE’s revenues, and what the path/timeframe to improved profitability in HPC and AI is. Taken at face value however, the current run rate of wins ($400M per month, which is likely unsustainable) could add several points to HPE's total revenue growth if truly incremental. HPE remains very bullish on Aruba – while the business continues to execute very well, growth will likely slow dramatically (or maybe even turn negative) at some point (potentially next year), which could spook investors. HPE is all in on Greenlake, and it is increasingly attractive - but it is unclear how incremental it is financially. CEO Neri underscored that he felt HPE’s stock was undervalued under "any reasonable valuation metric” — signaling the potential for incremental capital return post the close of the H3C sale."

For an analyst ratings summary and ratings history on HP Enterprise click here. For more ratings news on HP Enterprise click here.

Shares of HP Enterprise closed at $17.01 yesterday.

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