UBS Sees HPE Server Growth, Upgrades Stock

‘HPE has stabilized its server market share in the last year or so after losing seven points in the prior two years,’ writes UBS Equity Research Analyst Munjal Shah. ‘Gartner forecasts server market to grow four percent in 2020 after declining 11 percent in 2019.’

UBS is predicting Hewlett Packard Enterprise (HPE) server sales growth and has upgraded HPE shares from sell to neutral.

Munjal Shah, a UBS Equity Research analyst, sees HPE server sales growth of three percent versus a previous estimate of a one percent server sales decline.

“HPE has stabilized its server market share in the last year or so after losing seven points in the prior two years,” wrote Shah. “Gartner forecasts server market to grow four percent in 2020 after declining 11 percent in 2019.”

Shah increased his fiscal year 2020 HPE earnings per share estimate to $1.86, up from $1.62 with an HPE “price target” of $18, up from $13.

HPE shares were up 11 cents in mid-day trading to $17.55, a new 52 week high.

[HPE Stock Jumps 6 Percent On Bank Of America Double Upgrade]

“Our product mix shift analysis suggests gross margin will continue to expand and end markets are stabilizing (after a challenging 2019, Gartner estimates server and storage end markets in aggregate would be flat),” wrote Shah. “Our Sell rating was predicated upon continued pressure in end markets and related margin deterioration, which we no longer expect.”

The upgrade comes with HPE stepping up its server sales charge in the U.S. as part of an aggressive SMB sales offensive.

HPE is adding new sales resources in North America including an expanded inside sales team and has instituted a new instant pricing model for SMB partners for deals priced under $100,000.

Partners said that instant pricing model could have a significant impact on HPE Gen10 server sales in the US.

PKA Technologies Inc., one of HPE’s original platinum partners, is coming off double digit growth in fiscal year 2019 and is forecasting double digit growth once again in fiscal year 2020,said Paul Cohen, vice president of sales for New York-based PKA. “It’s good to see Wall Street recognizing HPE’s market growth,” he said.