HPE - Hewlett Packard Enterprise - A little green in this sea of red?

NOTE: There are a couple PDFs attached at the bottom from reports that Fidelity generates.

UPDATE Dec-4th: I updated the charts & PDFs (and thread title). I have noticed this past week (11/29 - 12/3) while the market took a serious dump HPE actually came out in the green. Up 1.2% on Friday (while everything else tanked) and up 4.26% for the week overall.

I think this could continue to be an interesting stock to watch, especially with the rocketing volatility in the market. It might be one of a handful of decent stocks to park some cash to let grow a little and ride out the storm.

One thing I didn’t pay attention to is HPE pays a decent 3.2% dividend, and they announced on their earnings they would be paying out their latest at the same .12 cents/share, Ex-Div date is 12/9/2021 and Pay Date is 1/7/2022.

(Original earnings write-up below)

After seeing HPQ’s earnings and a respective 11% jump in stock price I decided to do a little digging into HPE (HP’s enterprise division which was spun-off in 2015), which has earnings coming up on 11/30 (Tuesday) after market close.

Without diving into specifics and certain niches and whatnot, when you want to look in general at the two largest enterprise OEM companies in the world, they are Dell (#1), and HPE (#2).

First let’s get HPQ out of the way, their largest segments are the desktop / laptop PC’s and printers. The printer segment was flat, so forget about that. However, Personal Systems net revenue was $11.8 billion, up 13% year over year (up 10% in constant currency) with a 6.5% operating margin. Consumer PCs net revenue decreased 3% and Commercial PCs net revenue increased 25% . Total units were down 9% with Notebooks units down 12% and Desktops units up 2%.

The interesting tidbit from that is commercial revenue was up substantially, giving us a little taste at what the enterprise market might be doing.

Next up is Dell recently had their quarterly earnings, with their stock increasing about 5%. Keep in mind that Dell recently spun-off VMware, so there has been some turmoil. Some key highlights from their earnings make mention of robust demand, and continued growth in high-value segments, including Commercial PCs. Also, storage revenue was $3.9 billion, up 1%. Servers and networking revenue was $4.5 billion, up 9% for a fourth consecutive quarter of year-over-year growth.

So now that brings us to HPE.

Operating segments

  • Intelligent Edge (10% of FY20 revenue) – offers platforms designed for network security, including Aruba Networks and Silver Peak Systems
  • HPC & MCS (11% of FY20 revenue) – High Performance Compute and Mission Critical Systems. Also includes Hewlett Packard Labs
  • Compute (44% of FY20 revenue) – the core server business
  • Storage (17% of FY20 revenue) – the core storage business, including recent acquisition Zerto
  • HPE Financial Services (12% of FY20 revenue) – provides financing services for HPE customers and partners
  • A&PS (4% of FY20 revenue) – Advisory and Professional Services through ‘HPE Pointnext’.
  • Corporate Investments (2% of FY20 revenue) – includes ‘HPE Pathfinder’ (HPE’s venture capital arm) and the Communications Technology Group

Okay, see we can see that 44% of their 2020 revenue came from “compute”, which in plain and simple terms is selling physical servers, I’m sure mostly Proliant and various Cloudline models. Storage was 17%, but if Dell’s was pretty flat (1% growth), we can assume HPE’s likely will be too.

Back on November 12th, Goldman Sachs Analyst Rod Hall downgraded HPE to “sell” and cut his price target from $16 to $14, causing the stock to fall about 7%. He cited weakening spending environment for U.S. information technology.

I’m sorry but have to call BS on Goldman, if both HPQ & Dell had some record quarters, along with the news talking non-stop about the semi-conductor industry and seeing AMD & Nvidia reaching record highs, and the President talking about how important it is to bring more chip manufacturing to US soil, that doesn’t really sound like a weakening in IT spending to me.

While Dell’s 1-year chart has been in a nice uptrend, HPE’s has been a bit more rocky. I still believe that HPE will have very positive Q3 earnings come Tuesday. Overall it is rated as a moderate buy with price targets from $14 to $21 according to Tipranks & Webull.

I’m NOT recommending gambling on the actual earnings , but rather possibly play off the movement afterwards. The report will be after-hours, so if it is positive there could be a shares play AH/PM, and likely an options play at open hoping the stock will continue to climb some more off sentiment for that day.

HPE - Company Research Highlights Report - 12-4.pdf (58.7 KB)
HPE - Compustat Company Report - 12-4.pdf (247.9 KB)


Well HPE’s earnings were a mixed bag… Stock moved down several %… I’m sure some was due to the market severely tanking that day, then the mediocre report AH didn’t really do anything for anyone.

This is why I didn’t recommend playing the ER gamble. I wouldn’t even recommend trying to do anything post-ER with as volatile as the market is right now from everything else. Maybe next quarter.

HPE posted earnings of $0.52 per share, up 26.8% compared to the prior-year quarter, and 3 cents better than analysts’ estimates of $0.49 per share.

Moreover, net revenue rose 2% year-over-year to $7.35 billion, yet was marginally lower than the analyst estimates of $7.39 billion.

Responding to HPE’s Q4 performance, Susquehanna analyst Mehdi Hosseini, said, “HPE had somewhat mixed results for the October quarter, with some business segments coming in above expectation, while others were in line or below… Management expects the supply chain constraints to last until at least 2H22. The backlog remains strong for HPE, although much of this backlog is due to a lack of customer acceptances.”

I updated the first post with a fresh chart & PDFs, along with a couple paragraphs of info. I think HPE could continue on an uptrend in the coming week(s), possibly riding sentiment from its earnings, growth in the enterprise sector, who knows…

Definitely worth keeping an eye on.