Give Hewlett Packard Enterprise (NYSE:HPE) credit: it sees a fairly bright future ahead and it has some concrete reasons for seeing such a thing. In fact, the company made some exciting gains in pre-market trading today on the strength of those reasons—it was up 2.9% at one point—and though those reasons may seem familiar, they will prove no less valid.
An Increasing Comfort With Current Numbers
The company bolstered its outlook for the fiscal year 2021, thanks mainly to the move to work-from-home protocols spurred by the outbreak of COVID-19. Not surprisingly, such a move has generated opportunity for many firms, from Zoom (NASDAQ:ZM) to Peloton (NASDAQ:PTON), and Hewlett Packard Enterprise believes it will prove just as much a beneficiary of such conditions as other firms.
Word from the company's CFO, Tarek Robiatti, suggests big things to come; the FactSet consensus for the company's profit per share is $1.46, but Robiatti noted the company expects to come out in a range between $1.56 per share and $1.76. Even the pessimistic end of the range is still well above expectations, so that likely means good things to come for share prices, assuming the company can actually pull those numbers off.
Additionally, Robiatti noted that the company finds the consensus outlook of $26.9 billion in revenue to be a “comfortable” figure, which suggests that it should be able to match that figure when the final numbers come out.
Gains For Hewlett Packard Enterprise Go Beyond Work-From-Home
Driving those figures, as most will see coming, is what Robiatti called “operational improvement.” Essentially, the market for enterprise systems available directly to end users, most of them working from home, is likely to continue to be brisk for the next few months to come. While there have been signs of interest in returning, at least part-time, to the central office—even employees are a little interested in returning to that oh-so-familiar office, not to mention some government officials who want life back in the tax base of take-out coffee, donuts, and similar operations—it's clear work-from-home will be at least an option for the foreseeable future.
That's driving a few operational changes at Hewlett Packard Enterprise as well, reports note; the CEO, Antonio Neri, noted that the company's current mission is to focus harder on “as-a-service” offerings. Commonly, this means cloud-based systems that can be accessed remotely from just about anywhere, or the kind of thing that's tailor-made for the work-from-home crowd, which has never been so massive.
Indeed, one of the biggest moves in this sector, the company's GreenLake system, has been part of the lead on this phenomenon. The company's as-a-service lineup is expected to better than double current revenue, going from around $900 million this year to about $2.1 billion in 2023. That's a compound annual growth rate (CAGR) of around 35%, reports note. The rest of the company is only expected to see gains in the 1% to 3% range. In fact, Hewlett Packard Enterprise recently completed a deal with Wells Fargo to see the GreenLake system put in place therein.
Is It a Sustainable Future?
The good news for Hewlett Packard Enterprise here is that, while it's banking pretty heavily on the success of its as-a-service lineup, it's a product line that's likely to do well, especially in the near-term. Reports suggest the company has already set up arrangements with the Czech Republic government to build the most powerful supercomputer the country has ever seen. Known currently as “EURO_IT4I”, the system will be put to a range of uses, from weather forecasting to fighting COVID-19.
Our latest research, meanwhile, suggests the analysts are starting to come around to Hewlett Packard Enterprise ownership; while the company is still rated a “hold” with two “sell”, 13 “hold”, and five “buy” ratings, that's an improvement from three months ago, where there were two “sell”, 14 “hold” and four “buy” ratings. Even the price targethas recovered somewhat from losses 30 days ago, going from $12.25 to $12.36 per share.
There's little doubt that work-from-home will be part of the landscape for a good while yet, no matter what advances are made in terms of fighting the coronavirus. The entire notion has proven too valuable not to use, though some question if centralized office work might not be better overall. Hewlett Packard Enterprise is rapidly diversifying, but at the same time playing to its strengths and offering a product many businesses are increasingly eager to put to work. This not only better ensures short-term success, but also helps drive success in the longer term as well. It may, therefore, be a better time than ever to consider adding Hewlett Packard Enterprise shares to your portfolio lineup.
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