Analyst Note| Brian Colello, CPA |
We are maintaining our $14 fair value estimate for no-moat Hewlett Packard Enterprise, or HPE, after the company reported decent first-quarter earnings. While revenue landed slightly short of our expectations, HPE’s adjusted earnings surpassed expectations, largely attributed to the mix shift towards higher margin software products. HPE continues to emphasize its goal to achieve recurring revenue from its as-a-service model exemplified by annualized revenue run-rate growing 23% year over year and record demand for as-a-service offerings with orders up 136% year over year. HPE continues to face revenue headwinds from industrywide supply chain issues yet remains confident in its fiscal year revenue outlook due to a growing order backlog indicating strong demand for its products.