Hewlett Packard Enterprise (HPE) stock is trading notably lower Tuesday after the technology company announced a $1.35 billion convertible stock offering.
According to a filing with the Securities and Exchange Commission (SEC), HPE will offer 27 million shares of Series C Mandatory Convertible Preferred Stock to raise $1.35 billion, the company announced after the market closed on Monday. It will also grant underwriters a 30-day option to purchase up to an additional 3 million shares, which would allow it to raise an extra $150 million.
HPE said it will use the proceeds from the offering to fund all or a portion of its pending acquisition of Juniper Networks (JNPR), which was announced in January, and to pay related fees and expenses. If any capital is left over, the company said it would be used for general corporate purposes.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The news comes less than a week after HPE reported its fiscal third-quarter earnings results, in which it disclosed a 10% year-over-year rise in revenue to $7.7 billion and a 2% increase in its earnings per share (EPS) to 50 cents.
Why is Hewlett Packard stock lower?
Hewlett Packard stock is selling off on the news because when a company announces a stock offering, it often leads to a decline in its share price over concerns of dilution. A stock offering increases the number of shares available in the market and reduces the ownership percentage of existing shareholders. The dilution also negatively impacts a company's earnings per share since there are more shares outstanding.
A stock offering can also cause concern because it shows that the company needs additional capital and is willing to dilute existing shareholders to raise it.
Is HPE stock a buy, sell or hold?
Tuesday's decline has Hewlett Packard down nearly 6% for the year to date. Yet, Wall Street remains bullish on the tech stock.
According to S&P Global Market Intelligence, the average analyst target price for HPE stock is $20.96, representing implied upside of nearly 30% to current levels. Additionally, the consensus recommendation is Buy.
Financial services firm Argus Research is one of those with a Buy rating on the large-cap stock, along with a $26 price target.
"HPE has lagged the technology peer group for years based on slow EPS growth and even slower revenue growth," said Argus analyst Jim Kelleher in a September 6 note. "The stock trades at inexpensive current valuations, which, in our view, does not reflect potential for top- and bottom-line rejuvenation given the many ways in which HPE can participate in the artificial intelligence (AI) market.”
Argus' $26 price target sits nearly 60% above where HPE is currently trading.
Related Content
-
Investing Freebies: Perks You Get for Owning These StocksWhile the biggest investing returns come over the long term, these companies offer instant gratification for investors with several freebies and perks.
-
Choose a Beneficiary for Your Estate Plan: It's Not 'Duck, Duck, Goose'Choosing a beneficiary for your 401(k), insurance policy or similar assets is crucial for estate planning. Here is how to do it, and six pitfalls to avoid.
-
Investing Freebies: Perks You Get for Owning These Stocks
While the biggest investing returns come over the long term, these companies offer instant gratification for investors with several freebies and perks.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client ReviewsFinancial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop InvestmentsTruck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
How Digital Platforms Are Changing the Way You Invest in GoldInvesting in gold is easier than ever thanks to digital platforms. Learn how online tools are lowering costs, increasing transparency and making gold accessible to all investors.
-
Stocks Rise to Start Fed Week: Stock Market TodayThe Nasdaq Composite and S&P 500 hit new record closing highs as Wall Street awaits the Fed's next rate cut.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams NowBeyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
