Hewlett Packard Enterprise’s Q2 Misses Expectations, Underscores Value of Cloud Transition; $14 FVE

We maintain our $14 fair value estimate for no-moat Hewlett Packard Enterprise after the company reported its second-quarter results. Revenue landed slightly below our expectations, caused by the conjunction of currency headwinds, COVID-19 shutdowns in China, and the ceasing of all business in Russia, all leading to an estimated $250 million impact on the top line. The quarter had its bright spots as well, with its as-a-service model orders up 107% year over year and annualized revenue run-rate increasing 25% year over year despite ongoing supply constraints. Its flagship as-a-service offering, HPE GreenLake, converged with its networking business, Aruba, to offer the flexible cloud model to a much broader customer base. Shares are down 7% to $14.75 in afterhours trading, and we view shares as fairly valued.