Analyst Note| Mark Cash |
We are maintaining our $14 fair value estimate for no-moat Hewlett Packard Enterprise after its second-quarter results. Revenue growth was slightly higher than our expectations, while strong gross margins and controlled expenses led to earnings much higher than we anticipated. HPE posted broad-based strength and a bounce back to annual growth, aided by the year ago quarter being the worst impacted by the pandemic. While we expect HPE to benefit with its shift toward offering its portfolio as-a-service and believe it is well positioned in certain higher growing IT segments, core solutions potentially facing strong headwinds makes us cautious about sustained, long-term growth.