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.