HPE Upwardly Revises FY 2021 View Above Analysts’ Forecasts

HPE Upwardly Revises FY 2021 View Above Analysts’ Forecasts
October 19, 2020


Hewlett Packard Enterprise Co (NYSE: HPE) upwardly revised its FY 2021 outlook, stating that the work at home scenario caused by the COVID-19 pandemic has increased the demand for its products and services. The upwardly revised FY 2021 earnings estimates were higher than the Street forecasts. The stock closed at $9.48, down $0.40 or 4.05% from the earlier close.

The San Jose, California based provider of High-Performance Compute & Mission-Critical Systems (HPC & MCS) now expects FY 2021 non-GAAP diluted earnings in the range of between $1.56 and $1.76 per share, an increase of 10% on a y-o-y basis (using mid-point as a reference after adjusting for expenses related to stock-based compensation).

The company’s CFO Tarek Robiatti stated that the FY 2021 GAAP diluted net earnings will range between $0.34 and $0.54 per share, an increase of $0.77 on a y-o-y basis (using mid-point as reference). The edge-to-cloud platform-as-a-service provider also reaffirmed its revenue outlook of $26.9 billion for FY 2021.

HPE’s CEO Antonio Neri aims to transform HPE from merely selling software and hardware to IT companies into “an as-a-service company.” Robbiati pointed out that revenue from GreenLake and other “as-a-service” is anticipated to increase from $900 million in FY 2020 to $2.10 billion in FY 2023, reflecting a compounded annual growth rate of about 35%.

Furthermore, Robbiati reaffirmed its forecast for the yearly recurring revenue (ARR) to increase by 30% to 40%. HPE also expects operating profit to increase from 10% to 12% and adjusted EPS to grow by 7% to 9% through 2023.

The enterprise information technology company also revealed its three-year financial outlook. HPE anticipates currency-adjusted yearly revenues to record a growth of 1% to 3% through 2023. Notably, between FY 2020 and FY 2023, the company forecasts free cash flow to increase at a 3-year CAGR (Compounded Annual Growth Rate) of more than 50%. For FY21, the company expects free cash flow of between $0.90 billion and $1.10 billion, an increase of 65% on a y-o-y basis.

Neri stated that the COVID-19 pandemic “has served as a catalyst, making digital transformation a strategic imperative for enterprises.”

Regarding the positive impact of COVID-19, Neri said, “While the global pandemic is unlike any crisis we have ever faced, it has served as a catalyst, making digital transformation a strategic imperative for enterprises.”

Neri also detailed on the plethora of growth opportunities: “Enterprises need to deliver secure connectivity, remote work solutions, data analytics capabilities and mobile-first, cloud-like experiences to their employees and customers. And they need to do it with speed and flexibility, preserving liquidity to navigate the macro economic uncertainty and adapt to the new world. This is a significant opportunity for Hewlett Packard Enterprise.”

During the third-quarter earnings call, the Storage, Advisory and Professional Services (A&PS) company forecast FY 2020 adjusted earnings of $1.30 to $1.34 per share.

Considering the rising demand for HPE’s products and services, George Iwanyc, an analyst at Oppenheimer, has issued a “buy” rating to Hewlett Packard Enterprise (HPE) with a price target of $13.

The upward revision of FY 2021 outlook and “buy” rating from Oppenheimer analyst is expected to keep the stock range-bound with a slight bullish bias in the short-term.

The historical price chart indicates that the stock is trading near its strong support level of 9. The next major resistance is anticipated only near 15. Additionally, the stochastic oscillator is also rising. Therefore, we are expecting the stock to move up in the short-term.

hpe - technical analysis - 19th October 2020

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Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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