Hewlett Packard Enterprise, Pure Storage slip as BofA downgrades on multiple storage issues

Hewlett-Packard corporation office building in Mississauga, Ontario, Canada

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Hewlett Packard Enterprise (NYSE:HPE) and Pure Storage (NYSE:PSTG) shares slipped on Friday after Bank of America analyst Wamsi Mohan downgraded the storage companies on concerns over slowing demand and supply chain issues.

Mohan cut the ratings on both Hewlett Packard Enterprise (HPE) and Pure Storage (PSTG) to neutral from buy due to multiple issues such as the potential for a possible recession, business slowing down in Europe, Covid-related shutdowns in China and ongoing supply chain disruptions.

"Given a worsening supply chain due to recent China lockdowns," Mohan said in a research note. "We expect negative estimate revisions and we are incrementally worried about order deceleration." Mohan also cited recent negative commentary from Cisco Systems (CSCO) as adding to his more-cautious stance on the storage sector.

In addition to cutting his ratings, Mohan lowered his price target on HPE (HPE) to $16 a share, from $19, and cut his view on Pure Storage (PSTG) to $27 a share from $34.

HPE (HPE) shares gave up more than 2%, while Pure Storage (PSTG) was off by more than 5% in early trading, Friday.

Concerning Pure Storage (PSTG), Mohan noted the firm is cautious on demand over the next several quarters, as recent checks into spending indicate that spending on storage is "turning lower."

HPE (HPE) and Pure Storage (PSTG) weren't the only storage sector companies in Mohan's sights. Mohan lowered his price target on Dell Technologies (DELL) to $65 a share from $76, and cut NetApp's (NTAP) target price to $75 a share from $96, citing the pending decline in the storage market.

Last month, Morgan Stanley cut its rating on Hewlett Packard Enterprise (HPE), highlighting weak data coming from chief information officers and the company counting on about 60% of its revenue coming from servers and storage.

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