Mr.Bada Posted April 12, 2022 Posted April 12, 2022 Link : https://www.google.com/amp/s/www.barrons.com/amp/articles/morgan-stanley-cautious-tech-hardware-stocks-51649786216 Morgan Stanley says companies such as HP Enterprise could benefit in the short term from higher prices brought on by supply-chain problems. MARK FELIX/BLOOMBERG Citing concerns about a potential slowdown in corporate IT spending, Morgan Stanley analyst Meta Marshall has turned wary on telecom and networking stocks. In a Tuesday research note, she lowered her ratings on Hewlett Packard Enterprise , F5, and NetApp . She now rates HP Enterprise (ticker: HPE) at Underweight, down from Equal Weight previously, with a target price of $15, compared with $17, and a little below the stock’s Monday closing level of $15.81. For F5 (FFIV) and NetApp (NTAP), her ratings dropped to Equal Weight from Overweight. Her target price for F5 is now $250, down from $280 but still well above its Monday closing level of $207.49. Marshall no longer designates the company a “top pick.” For NetApp, her new target is $91, down from $102, while the stock ended Monday at $77.12. She also reiterated her Underweight rating on Juniper Networks (JNPR). HP Enterprise, F5 and NetApp didn’t immediately respond to requests for comment.Marshall says that supply-chain problems—and the higher prices that come as a result—could buoy earnings for the IT hardware companies in the short run. But she sees softening orders in the 2022 second half as a result of inflation, Covid-19, and geopolitical uncertainty. The analyst said she is starting to see “signs of weakness accumulate,” citing cautious results from a new survey of chief information officers about their hardware spending plans. She adds that in recent channel checks, resellers cited multiple reasons for caution about spending, including the Russian war on Ukraine, inflation and strong IT spending over the past year. It may prove difficult for some vendors to have their customers fully absorb higher costs for components and logistics, she said.On HP Enterprise in particular, she noted that while the stock’s valuation isn’t demanding—it trades for less than 8 times forward earnings—she is wary about the company’s high exposure to storage and servers in a tightening environment for IT spending. Together, they account for 60% of revenue. She said she also sees risks in the company’s 37% revenue exposure to Europe given the situation in Ukraine. In Tuesday trading, HP Enterprise shares were down about 1.2%, F5 was unchanged and NetApp was up 0.8%, to $77.77. Write to Eric J. Savitz at eric.savitz@barrons.com
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