HPE Earnings: Growth in Hybrid Cloud and Expense Control Exceeds Expectations; Raising Fair Value

No-moat-rated Hewlett Packard Enterprise reported fiscal fourth-quarter results that largely met our overall expectations, with adjusted EPS of $0.58 versus our expectation of $0.57. Within these results, growth in hybrid cloud was exceptional, as was expense control. At the same time, the artificial intelligence order backlog also remained intact when counting orders that occurred once the quarter closed. This keeps all key parts of our thesis intact, and we raise our fair value estimate to $25 per share from $23. When we raised our fair value to $23 per share from $17 back in late August, shares were trading close to $18, and even fell below $17 in September. Shares have since appreciated roughly 15%, and we think HPE shares still have upside remaining. With our latest fair value raise, shares are once again trading at greater than a 10% discount. We believe HPE has the opportunity to execute on its AI opportunity, improve margins within the hybrid cloud business, improve growth rates within the hybrid cloud and intelligent edge segments, and execute the Juniper acquisition satisfactorily, which we believe would cause shares to be rewarded with a higher multiple.