More Work to Be Done at HP Enterprise
HPE Next should help the no-moat company better address numerous secular headwinds, such as cloud migration and hardware commoditization.
HP Enterprise's (HPE) third-quarter performance beat our expectations due to solid performance in its core server business. The company saw an overall improvement in the macro trend, solid performance in its Synergy product line, and 10% organic growth year over year in the high-performance computing segment. The recent acquisitions of Nimble Storage and SGI also contributed to the top-line performance. HP Enterprise announced HPE Next, an overhaul of company’s operations aimed at removing remnants of combined operations with HP Inc. and improving business agility. We like this initiative and believe it will help HP Enterprise to better address numerous secular headwinds the company is facing, such as cloud migration and hardware commoditization. Still, we believe there is more work to be done, and we maintain our $16 fair value estimate for this no-moat firm. With the shares trading at 3 stars, we recommend potential investors remain on the sidelines.
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Ilya Kundozerov does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.