Hewlett Packard Enterprise: Positioned Well For Multi-Year Outperformance
Summary
- Hewlett Packard Enterprise has strong growth prospects, enabled by customers' adoption of its GreenLake and AI solutions. Revenue quality is also increasing with greater annualized revenue streams.
- HPE is trading at an attractive 30.6% discount to its peers. A higher annuity portion of revenues is a catalyst for multiple re-rating.
- A strong, multi-year breakout is imminent on the relative technicals after more than 2 years of consolidation after a sharp V-shaped recovery from support levels.
- An explosion in net working capital suggests that growth is enabled via the provisioning of financing solutions. Worsening cash flow conversion metrics and credit quality are key risks to monitor.
- My thesis is focused on the operating business of HPE. Hence, my bullish view is applicable to both the equity share class and the convertible preferred equity share class. I am invested in the equity shares as I believe that has more upside potential, albeit at a higher risk.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of HPE, VOO either through stock ownership, options, or other derivatives. 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.
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