Hewlett Packard may offer long term value that isn’t currently being reflected in the share price. The company has been plugging along in an attempt to turn things around as the PC market sinks, and there are signs of revival.

Hewlett-Packard Company Upgraded For Long Term Catalysts

As a result, analysts at Jefferies upgraded HP from Hold to Buy and bumped up their price target from $37 to $41 per share.

Hewlett-Packard’s free cash flow to recover

In a report dated April 1, analysts James Kisner, Jason North and Timur Ivannikov said they think HP’s current valuation includes uncertainty regarding the company’s plan to separate into two companies. They admit that there could be volatility in Hewlett-Packard stock through the split but say they expect Wall Street to eventually recognize the value that lies within.

The Jefferies team also says concerns about long term free cash flow may be weighing on the stock, noting that shares have pulled back by 19% since the last earnings report when management was cautious regarding guidance for this metric. They expect free cash flow to recover in 2016 and 2017, however.

Specifically, they note that non-recurring items like separation costs and capital expenditures will come to an end. Their more positive view on Hewlett-Packard is largely separated on the value of the company’s cash.

Lowering estimates for HP

The Jefferies analysts further say that they’re actually cutting their earnings per share estimates even though they bumped up their price target. The reason for their estimate revisions is because the split is going to result in less efficiency for a time.

They believe the recent pullback in Hewlett-Packard shares is due to fear about whether there will be more cuts in earnings per share. Another reason they give is the expectation that management will guide for further expenses related to the split in the future.

Their new earnings per share estimate for the 2016 fiscal year is 14% under the consensus estimate, which they don’t think includes costs and lower efficiencies from the split. Their 2017 earnings per share estimate is just 3% lower than consensus, however, and their free cash flow for 2017 is 10% higher than the consensus estimate.

Catalysts coming for Hewlett-Packard

The Jefferies team’s long term thesis for HP includes four catalysts for the company’s shares. They think management will provide more details to clear up their guidance for free cash flow.

First, they say the earnings call for the July quarter, which is scheduled for August, should clear up some of those questions. They also say more details will be coming at Hewlett-Packard’s double feature analyst day in September, which will cover each business.

Third, they say there should be an investor roadshow coming, and management will provide further guidance on free cash flow on the earnings call for the fiscal fourth quarter, which is set for November.

As of this writing, shares of Hewlett-Packard were up 0.42% to $31.42 per share.