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Stock Analyst Update

HPE Focuses on Subscriptions and Services

We maintain our $16 fair value estimate for the no-moat firm.


 Hewlett Packard Enterprise (HPE) outlined operational and market strategies during its annual analyst day. Not surprisingly, the company has decided to exit the hyperscale cloud x86 server market, where it competes with “white-box” manufacturers. The overall company’s strategy is focused on high margin niches, while executing on yet another round of restructuring. The company is seeing a benefit from following Cisco’s footsteps in “weaponizing” its products with add-on, recurring subscriptions and services. The latter is becoming an imperative for the firm, given its 75% contribution to operating profits. The firm also issued an outlook for fiscal 2018, which was largely in line with consensus and our expectations. Altogether, our thesis remains intact, and we maintain our $16 fair value estimate and no economic moat rating.

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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.