HPE Earnings: Softer Short-Term Guidance Appears Finite and Has No Impact on Our Long-Term Thesis

We maintain our $16 fair value estimate for shares of Hewlett Packard Enterprise after it reported weak fiscal first-quarter results, but we maintain our long-term thesis. HPE’s main end markets continue to be plagued by weaker demand. Once the bright spot of networking, it is softening now, which matches what peers like Cisco are seeing in the campus market where HPE largely plays. We expect networking softness to weigh on HPE’s profitability through fiscal 2024. Management is guiding for more weakness next quarter, but for a much better second half of the fiscal year, largely driven by improving growth for GPU servers for artificial intelligence applications. Shares dipped 4% on weaker near-term guidance and we see the stock as fairly valued.