Looking ahead to 2015 and 2016, Credit Suisse estimates growth of 0.1% and 0.9% respectively for PCs. The PC market appears more predictable than in recent years. Credit Suisse’s IT survey suggests that incumbents will continue to struggle from the impact of the cloud and this is reflected in the enterprise revenue estimate for a decline of 2.4% for the full year 2015.
The management guidance for the full year 2015 earnings per share was in the range of $3.83 to $4.03, which Credit Suisse considers conservative. Also considering the $1.8 billion in restructuring, better IPG margins, share gains in PCs and a higher cash return suggest an upside for free cash flows in the range of $8 billion to $9.3 billion.
In the report Credit Suisse analyst Kulbinder Garcha summarizes the break up analysis as:
We have outlined a preliminary balance sheet and free cash flow post-split and conclude that of the $8 billion of free cash flow in fiscal year 2015, $4.4 billion is from HP Enterprise and $3.6 billion from HP Inc. We see a post-split scenario where HP Inc. could have an interesting capital return story by levering up with scope for $11 billion of cash return over the first three years.
The stock has a consensus analyst price target of $41.24 which implies an upside of 4.2% from current prices. The previous highest price target was $47 which implied an upside of 18.8%. Credit Suisse’s price target of $55 has an upside of 39%.
Shares of Hewlett-Packard were flat at $39.57 in the last hour of trading and a 52-week trading range of $27.27 to $40.95. It has a market cap of roughly $74 billion.
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