HP Stock Fell Due to Bad News in Its Q2 Results

Today at 6:07 AM ET, HP (NYSE:HPQ) stock fell 6.3% to $16.05 in the pre-market session following its results for the second quarter of fiscal 2020 on Wednesday. Notably, the quarter ended on April 30. The technology company reported mixed results in the second quarter. Although the earnings beat analysts’ consensus expectation, the sales missed the estimates. The company’s third-quarter earnings guidance was lower than Wall Street’s estimates.

HP’s earnings results for Q2

In the second quarter, HP reported an adjusted EPS of $0.51 compared to $0.53 in the second quarter of fiscal 2019. The earnings beat analysts’ consensus estimate of $0.44 per share. The company generated sales of $12.5 billion—a reduction of 11.2% from the second quarter of fiscal 2019. The company missed analysts’ consensus revenue estimate of $12.93 billion.

HP expects its non-GAAP EPS to be $0.39–$0.45 for the third quarter. Wall Street analysts expect HP to report an adjusted EPS of $0.46 on revenue of $13.4 billion in the third quarter. The company didn’t provide fiscal 2020 guidance amid uncertainties related to the coronavirus outbreak.

According to a MarketWatch report, “HP has not only been battered by the coronavirus pandemic but dodged a hostile takeover bid by Xerox Holdings Corp. that was ultimately dropped by Xerox in late March. On top of all that, HP announced last year it planned to slash between 7,000 and 9,000 jobs by the end of 2022 to save $1 billion a year.”

Analysts also expect HP’s revenues to fall by 6.7% YoY (year-over-year) in fiscal 2020 to $54.8 billion. The sales could rise by 0.4% YoY in fiscal 2021 to $55.0 billion. The adjusted earnings will likely fall by 4.0% YoY in fiscal 2020 to $2.15 per share. However, the profits could rise by 11.6% YoY to $2.40 per share in fiscal 2021.

Analysts’ recommendations for HP stock

Among the 16 analysts following HP stock, four recommend a “buy,” ten recommend a “hold,” and two recommend a “sell.” Wall Street analysts’ mean target price on the stock is $17.77, which implies a 3.8% gain from the current level of $17.12. The consensus target price for the stock has fallen from $19.12 in April—a fall of 7.1%.

Many analysts revised their target price for HP stock after its second-quarter earnings results.

  • J.P. Morgan downgraded the stock from “overweight” to “neutral” and decreased its target price from $21 to $20.
  • Credit Suisse decreased its target price from $17 to $16.
  • Deutsche Bank increased its target price from $17 to $18.

Stock returns

HP stock rose 0.35% on Wednesday and ended the day at $17.12. At this closing price, the company’s market cap is $24.5 billion. Notably, the stock is trading 28.5% below its 52-week high of $23.93 and 36.5% above its 52-week low of $12.54.

Based on the closing price on Wednesday, HP stock was trading 9.1% above its 20-day moving average of $15.69. The stock is also trading 10.8% above its 50-day moving average of $15.45 and 6.8% below its 100-day moving average of $18.36. HP’s 14-day relative strength index number is 60 which suggests that it isn’t oversold or overbought.

HP stock has a middle Bollinger Band level of $15.69, while its lower Bollinger Band level is $13.61. On Wednesday, the stock closed near its upper Bollinger Band level of $17.12, which suggests that it’s overbought.

Hewlett Packard Enterprise’s (NYSE:HPE) adjusted EPS for the second quarter of fiscal 2020 (quarter ended April 30) fell 47.6% YoY to $0.22. The company missed analysts’ adjusted EPS estimate of $0.29. The company’s second-quarter revenue fell 16.0% YoY to $6.0 billion, which missed analysts’ estimate of $6.3 billion. Read Why Hewlett Packard Stock Is a ‘Sell’ after Its Q2 Earnings to learn more.

On Wednesday, Xerox (NYSE:XRX) and HPE stocks returned 3.8% and 3.7%, respectively.