By Senad Karaahmetovic
Bank of America analyst Wamsi Mohan downgraded shares of Pure Storage (NYSE:PSTG) and Hewlett Packard Enterprise (NYSE:HPE) to Neutral from Buy as he takes a more cautious position on stocks in the bank’s IT Hardware Industry research coverage.
Mohan’s actions come as he sees more downside possible in this sector given that historically IT Hardware coverage has declined 40-60% in a past downturn. Given that the coverage is now down 23% YTD, there’s much more room for a possible fall in valuations of IT hardware stocks.
On HPE, the new price target is $16.00 per share, down from $19.00.
“Given a worsening supply chain due to recent China lockdowns (negative commentary from Cisco, continued logistical challenges from protracted lockdowns), we expect negative estimate revisions and we are incrementally worried about order deceleration. We see some risk to HPC revs from slower customer acceptance and associated margin pressure,” Mohan said in a client note.
The new price target for PSTG is $27.00 per share, down from $34.00.
“We are cautious on demand trajectory over the next several quarters, where our checks (see our VAR surveys: Dell, NTAP) indicate that confidence in storage spending is turning lower. Storage has also been relatively immune to supply chain issues and pent-up demand is a lower tailwind.”
Shares of both companies are down over 7% today.