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Why Hewlett Packard Stock Is a ‘Sell’ after Its Q2 Earnings

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Hewlett Packard Enterprise (NYSE:HPE) stock fell 7.8% in pre-market today at 8:41 AM ET. The stock fell after the company reported its results for the second quarter of fiscal 2020 on Thursday after the closing bell. Notably, the quarter ended on April 30, 2020. The enterprise cloud computing company reported lower-than-expected results in the second quarter amid the coronavirus outbreak.

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Q2 earnings results

In the second quarter, Hewlett Packard reported an adjusted EPS of $0.22 compared to $0.42 in the second quarter of fiscal 2019. The earnings missed analysts’ consensus estimate of $0.29 per share. Hewlett Packard generated total revenue of $6.0 billion—a reduction of 16% from the second quarter of fiscal 2019. The company also missed analysts’ consensus total revenue estimate of $6.3 billion. Hewlett Packard’s business was largely impacted by the COVID-19 pandemic.

In the second-quarter earnings release, Hewlett Packard CEO Antonio Neri said, “The global economic lockdowns since February significantly impacted our fiscal Q2 financial performance…We exited Q2 with $1.5 billion dollars in orders across the portfolio, representing two times the average historical backlog.” Neri added, “We are taking decisive steps to navigate the near term uncertainty, while ensuring we align resources to priority growth areas so that we are well positioned to accelerate our edge-to-cloud strategy and address the needs of our customers in a post-COVID-19 world.” Hewlett Packard unveiled a new cost-cutting plan to save $1 billion by 2022. To achieve the new cost-cutting goal, the company intends to shrink its workforce.

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Analysts’ recommendations for Hewlett Packard stock

Among the 22 analysts following Hewlett Packard stock, six recommend a “buy,” 13 recommend a “hold,” and three recommend a “sell.” Wall Street analysts’ mean target price on the stock is $11.11, which implies a 7.2% gain from the current level of $10.36. The consensus target price for the stock has fallen from $12.61 in April—a fall of 12%.

Many analysts revised their target price for Hewlett Packard stock after its second-quarter earnings report.

  • J.P. Morgan decreased its target price from $12 to $11.
  • Credit Suisse decreased its target price from $9 to $8.5.
  • Citigroup increased its target price from $7 to $8.
  • Oppenheimer decreased its target price from $15 to $13.
  • Raymond James downgraded the stock from “outperform” to “market perform.”

Stock returns

Hewlett Packard stock rose 0.8% on Thursday and ended the day at $10.36. At this closing price, the company’s market cap is $13.3 billion. Notably, the stock is trading 41.1% below its 52-week high of $17.59 and 39.4% above its 52-week low of $7.43.

Based on the closing price on Thursday, Hewlett Packard stock was trading 6.8% above its 20-day moving average of $9.70. The stock is also trading 8.7% above its 50-day moving average of $9.53 and 13.1% below its 100-day moving average of $11.92. Hewlett Packard’s 14-day relative strength index number is 58. The number suggests that the stock isn’t oversold or overbought.

On Thursday, Cisco Systems (NASDAQ:CSCO), HP (NYSE:HPQ), and Nokia (NYSE:NOK) returned -1.8%, -0.7%, and -1.3%, respectively.

At 8:41 AM ET today, the S&P 500 futures rose 0.07%, while the Dow futures rose 0.11%. To learn more, read BofA Survey: Fund Managers Expect Stock Market Crash.

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