Analyst Note| Mark Cash |
No-moat Hewlett Packard Enterprise’s 2% year-over-year revenue decline in its first quarter matched our expectations due to weakness for storage and high performance compute solutions. Digital transformation efforts brought on by the pandemic led to strength within the intelligent edge business, as enterprises upgraded their switching and wireless infrastructure, which contributed to the overall revenue decline. We believe the worst of the pandemic is behind HPE and the company should return to year-over-year growth for the rest of fiscal 2021. Efforts to streamline the business through its transformational plan have helped the margin profile, and we expect HPE to remain more agile as it grows its software and as-a-service portfolio. We are modestly raising our fair value estimate to $14 from $13 and view shares as fairly valued.