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Hewlett Packard Enterprise Co HPE

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Morningstar’s Analysis

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HPE's Edge and High Performance Solutions Help Counter Server Headwinds in Q4; Maintaining $13 FVE

Mark Cash Equity Analyst

Analyst Note

| Mark Cash |

No-moat Hewlett Packard Enterprise's revenue declined slightly year over year, while non-GAAP EPS of $0.37 exceeded CapIQ consensus estimates by $0.03 in its fourth fiscal quarter. Revenue was up 6% sequentially, with higher growth areas such as edge and high performance compute helping to balance out weakness in server sales. Earnings were aided by selling a favorable portion of higher margin products and services as well as previous cost extraction efforts showing up in the financials. As data continues to grow and more entities adopt hybrid-cloud networking environments, we believe these higher growth areas and shift toward as-a-service are critical to HPE remaining a key cog in the IT infrastructure market. We expect these solutions to also help the margin profile of HPE over the long-term. Although management was upbeat about the demand environment improving and raised full-year earnings guidance, shares dipped slightly after reporting. We are maintaining our $13 fair value estimate and believe investors have a margin of safety.

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Company Profile

Business Description

Hewlett Packard Enterprise is a supplier of IT infrastructure products and services. The company operates as three major segments. Its hybrid IT division primarily sells computer servers, storage arrays, and Pointnext technical services. The intelligent edge group sells Aruba networking products and services. HPE's financial services division offers financing and leasing plans for customers. The Palo Alto, California-based company sells on a global scale and has approximately 66,000 employees.

11445 Compaq Center West Drive
Houston, TX, 77070
T +1 650 687-5817
Sector Technology
Industry Communication Equipment
Most Recent Earnings Oct 31, 2020
Fiscal Year End Oct 31, 2021
Stock Type High Yield
Employees 59,400