BofA/Merrill Lynch Trims Dell, HP, and Brocade Targets

It was just last week that Bank of America/Merrill Lynch said it was reaffirming the Hewlett-Packard Co. (NYSE: HPQ) was looking good and reiterated its Buy rating after its new higher guidance after updating its strategic realignment.  Now we have the bank lowering the target price for HP as well as for Dell Inc. (NASDAQ: DELL) and also for Brocade Communications Systems, Inc. (NASDAQ: BRCD).

For Brocade, the new price target goes down to $6.00 from a prior $6.50 target, based on 10x C2013E NOPAT of $0.64 less $0.26 net debt. For HP, the target was cut to $24.00 from a $27.00 prior target based upon 6x C2013E NOPAT of $4.95 less $5.30 net debt. For Dell, the target price was cut to $15.00 from a prior target of based on 5x C2013E NOPAT of $2.15 + $4.63 net cash.

Dell was noted as having weak PC demand and a solid start to 12G server cycle while HP was given a positive pre-announcement despite a challenging backdrop.  The report noted on NetApp operating margin to remain below long-term targets of 17-19% on lower volume and continued investment. For the second quarter outlook it sees sentiment as relatively neutral.

Brocade and Dell are both seeing their stock price down over 1%, while HP shares are currently down only 0.8%.

JON C. OGG