Entering text into the input field will update the search result below

Hewlett Packard Enterprises: Too Mixed To Be Attractive


  • HPE's as-a-service segment is immaterial today, and likely to remain inconsequential until 2022.
  • Even though share buybacks are suspend, its 5% dividend is here to stay.
  • Valuation is undoubtedly attractive. But whether it can turn around or not is a different matter. Thus, I'm staying on the sidelines and watching.
  • Looking for a helping hand in the market? Members of Deep Value Returns get exclusive ideas and guidance to navigate any climate. Get started today »

Investment Thesis

Hewlett Packard Enterprises (NYSE:HPE) has fallen from grace. And although its valuation is undoubtedly attractive, its underlying prospects are not alluring enough to make this investment one worth chasing today.

On the one hand, its balance sheet is not as strong as it first appears. Furthermore, although its 5% dividend yield is high, I do not believe it compensates investors enough to buy the equity simply on the premise of getting this high yield.

In summary, the time to get involved with HPE has not arrived yet.

Cheap Can Always Get Cheaper

Hewlett has taken an aggressive beating, no doubt. What's more, shareholders don't like to hear this, but cheap can always get cheaper. In other words, just because it has fallen meaningfully does not in and of itself point to a strong bargain opportunity. Ultimately, the stock is worth whatever its worth, irrespective of what it traded for last year.

I'll try to point to the positives and negatives, and how they line up for the shareholder.

For me, the biggest aspect which I have to square up with is that Hewlett's balance sheet is not so strong. Even though management points towards it having approximately $10 billion in liquidity, the bulk of this liquidity is undrawn credit capacity.

Source: Q2 2020 Investors Presentation

Accordingly, if we put aside its financing arm, you are left with a company that has a net debt position -- although, admittedly, not meaningfully leveraged. Nonethless, even if one makes the argument that there's flexibility to draw down credit to do something more agressively, such as share repurchases, I would question this strategy.

Share Repurchases Suspended, What About Dividends?

Objectively, I'm looking in hindsight, which makes my assertions not only unremarkable but unfair, too. Thus far, after deploying approximately $4.5 billion towards share repurchases these past two years, its

Strong Investment Potential:

Investing is about growing our savings and avoiding risky investments. Being highly selective when choosing a diversified portfolio of opportunities.

Investing Made Very EASY

I do the hard work of finding a select group of stocks that grow your savings.

  • Honest and reliable service.
  • Invest by avoiding losers.
  • Very simply explained stock picks. Helping you get the most out investing.
  • Helpful advice together with videos.

This article was written by

Michael Wiggins De Oliveira is an energy specialist whose primary focus is capitalizing on “the Great Energy Transition” - the confluence of decarbonization, digitalization with AI, and deglobalization - to achieve greater investment returns. Through his 9+ years analyzing countless companies, Michael has accumulated outstanding professional experience in the energy sector and a following of over 40K on Seeking Alpha.

Michael is the leader of the investing group Deep Value Returns. Features of the group include: Insights through his concentrated portfolio of value stocks, timely updates on stock picks, a weekly webinar for live advice, and "hand-holding" as-needed for new and experienced investors alike. Deep Value Returns also has an active, vibrant, and kind community easily accessible via chat. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (5)

HP has been a rudderless company for a couple of decades. Their best idea in the last 20 years was to put 1/2 the normal amount of toner in the laser printer cartridges that ship with printers so printer buyers would have to buy new (high margin) toner cartridges more quickly after buying a printer than normal.
Michael Wiggins De Oliveira profile picture
Not quite the same company. That's HP. This is HPE. Two very different companies.
Yes, one rudderless company became two.
Thanks for a timely assessment on HPE. I agree that now is not the time. I'd like to see HPE become a presence in it's field, so I have an initial limit order for HPE at $8.25. With potential skin-in-the-game, I'll pay more attention to it. The low entry point is dictated by my "iPhilosopher" Mr. Chit (full Chinese name: Ho Lee Chit)
Michael Wiggins De Oliveira profile picture
That's witty ;) Thanks for the comment. ;)
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.