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Hewlett Packard Enterprise Co HPE

Morningstar Rating
$21.84 +0.31 (1.44%)
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Company Report

HPE Earnings: We Lift Our Valuation on Stronger Short-Term Growth, but Shares Look Overvalued

We raise our fair value estimate for no-moat Hewlett Packard Enterprise to $17 per share from $16 after positive fiscal second-quarter results. Management raised its fiscal year guidance, and we now account for stronger growth from servers serving generative artificial intelligence applications over the medium term. The firm’s rising AI server sales mirror peers like Dell and Super Micro. We expect stronger growth here, but we don’t believe it will change the commodity-like nature of HPE’s server business or its no-moat rating. We also view AI servers as dilutive to HPE’s margin. Shares shot up as much as 15% after hours on positive AI results and the guidance raise, but we view the reaction as overexuberant. We see shares as overvalued.

Price vs Fair Value

HPE is trading at a 590% premium.
Price
$21.84
Fair Value
$59.00
Uncertainty
Medium
1-Star Price
$76.59
5-Star Price
$21.50
Economic Moat
Xndw
Capital Allocation
Hsvmnhqbw

Bulls Say, Bears Say

Bulls

We view HPE as the leader among peers in offering its entire portfolio as-a-service, which could give it an advantage in winning customers and reduce cyclicality in the future.

Bears

HPE participates in commoditylike markets to earn most of its revenue, which offer slim profit margins and erode an economic moat.

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News

Trading Information

Previous Close Price
$21.53
Day Range
$21.5622.82
52-Week Range
$14.4722.82
Bid/Ask
$22.10 / $22.15
Market Cap
$28.38 Bil
Volume/Avg
44.3 Mil / 15.9 Mil

Key Statistics

Price/Earnings (Normalized)
11.43
Price/Sales
1.02
Dividend Yield (Trailing)
2.34%
Dividend Yield (Forward)
2.38%
Total Yield
3.36%

Company Profile

Hewlett Packard Enterprise is an information technology vendor that provides hardware and software to enterprises. Its primary product lines are compute servers, storage arrays, and networking equipment; it also has a high-performance computing business. HPE’s stated goal is to be a complete edge-to-cloud company, and its portfolio enables hybrid clouds and hyperconverged infrastructure. It uses a primarily outsourced manufacturing model and employs 60,000 people worldwide.
Sector
Technology
Industry
Communication Equipment
Stock Style Box
Mid Value
Total Number of Employees
62,000

Competitors

Valuation

Metric
HPE
DELL
CSCO
Price/Earnings (Normalized)
11.4321.0411.49
Price/Book Value
1.314.05
Price/Sales
1.021.223.38
Price/Cash Flow
5.4713.8011.44
Price/Earnings
HPE
DELL
CSCO

Financial Strength

Metric
HPE
DELL
CSCO
Quick Ratio
0.430.400.68
Current Ratio
0.900.730.89
Interest Coverage
11.763.2419.46
Quick Ratio
HPE
DELL
CSCO

Profitability

Metric
HPE
DELL
CSCO
Return on Assets (Normalized)
4.38%6.27%15.60%
Return on Equity (Normalized)
11.96%36.40%
Return on Invested Capital (Normalized)
7.91%25.93%26.89%
Return on Assets
HPE
DELL
CSCO
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