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Hewlett Packard Enterprise Co HPE

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Morningstar’s Analysis

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HPE’s Analyst Day Showcases As-a-Service Growth Story; Maintaining $13 FVE

Mark Cash Equity Analyst

Analyst Note

| Mark Cash |

No-moat Hewlett Packard Enterprise's analyst day gives us confidence in the company's ability to find pockets of growth while its legacy offerings face challenging spending environments. We believe shifting its entire portfolio to as-a-service stays aligned with customer consumption trends for IT infrastructure. Additionally, we positively view HPE fueling investments into areas like edge compute, software-defined wide-area networking, or SD-WAN, and high performance compute, as these higher-growth markets can help offset headwinds in commodity compute and storage markets. While management expects HPE's revenue to grow at only a 1%-3% CAGR during fiscal 2020-23, it also expects adjusted operating profit and adjusted earnings to rise 10%-12% and 7%-9%, respectively, over the same time. In our view, HPE is prudently balancing investing in higher-growth opportunities without overextending itself, and ensuring shareholder returns through its dividend. HPE shares increased over 2% after the analyst day to break $10 as HPE reaffirmed fiscal 2020 guidance and provided guidance above CapIQ consensus expectations for fiscal 2021. We are maintaining our $13 fair value estimate and believe investors have an attractive entry point.

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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.

6280 America Center Drive
San Jose, CA, 95002
T +1 650 687-5817
Sector Technology
Industry Communication Equipment
Most Recent Earnings Jul 31, 2020
Fiscal Year End Oct 31, 2020
Stock Type High Yield
Employees 61,600