BMO Maintains Market Perform Rating On Hewlett-Packard Company Following Acquisition Of Aruba Networks


In a research report issued today, BMO analyst Keith Bachman maintained a Market Perform rating on Hewlett-Packard Company (NYSE:HPQ) with a $42 price target, following the news that the company has entered into a definitive agreement to acquire Aruba Networks, Inc. (NASDAQ:ARUN) for $24.76 per share, or $2.7 billion enterprise value.

Bachman wrote, “We believe the transaction will give HP better access to higher growth segments within networking, while we note that its legacy networking business incurred execution issues in the U.S. and China. We think Aruba could provide about ~$1.05 billion in revenue to HP’s FY2016 estimates, which could add 100 bps to revenue growth. We assume ~$100 million in annual stock-based compensation for Aruba, and we think the deal could generate an additional $0.04-0.06 in EPS for HP in FY2016.”

However, “While we think this deal is helpful for HP, we believe it is not enough to overcome headwinds in other businesses, particularly in services, with FX impacts permeating throughout the business. We maintain our Market Perform rating with no changes to our estimates or price target at this time.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Keith Bachman has a total average return of 27.6% and a 74.8% success rate. Bachman has a -3.9% average return when recommending HPQ, and is ranked #26 out of 3492 analysts.

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