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Hewlett Packard Enterprise Tops Earnings Forecasts, Ups Full-Year Guidance

By:
Tim Smith
Updated: Mar 3, 2021, 08:14 UTC

Hewlett Packard Enterprise Tops Earnings Forecasts, Ups Full-Year Guidance

Hewlett Packard

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Hewlett Packard Enterprise Company (HPE) traded mostly unchanged in Tuesday’s extended-hours session despite the enterprise-computing hardware company surpassing Wall Street expectations and raising its full-year forecast.

The company posted a fiscal Q1 profit of 52 cents per share while analysts had expected earnings of 40 cents a share. Moreover, the bottom line grew 18% from a year earlier. Sales of $6.83 billion also came in ahead of Street forecasts but were down from revenues of $6.95 billion reported in the same quarter last year.

Looking ahead, management now expects FY 2021 earnings to range between $1.77 and $1.80 a share, up from its previous forecasts of $1.60 to $1.78. CEO Antonio Neri told Barron’s that the company saw a recovery in enterprise IT spending throughout the quarter, adding that he anticipates demand gradually resuming this year.

As of March 3, 2021, Hewlett Packard has a market value of $18.86 billion, issues a healthy 3.29% dividend yield, and trades 22.36% higher year to date (YTD). Over the past 12 months, the shares have gained 12.5%. Valuation wise, the stock trades at nearly nine times projected earnings, slightly below its five-year average multiple of 9.65 times.

Wall Street View

In January, JPMorgan analyst Paul Coster upgraded HP Enterprise to ‘Overweight’ and lifted his price target to $16 from $13. Coster told investors the stock was a good “contrarian long trade,” given the company’s move into the SD-WAN space, its ongoing cost-cutting initiatives, and the expected recovery in enterprise IT spending.

Most other analysts have a wait-and-see view on the stock. It receives 13 ‘Hold’ ratings, 5 ‘Buy’ ratings, and 1 ‘Sell’ rating. Twelve-month price targets range from a Street-high $18 to a low of $10. The median target sits at $14 – 3.4% below Tuesday’s closing price of $14.50.

Technical Outlook and Trading Tactics

Since bottoming out around $8 a share in late October, the share price has trended sharply higher. More recently, traders have booked profits ahead of the company’s quarterly earnings. This provides a “buy the dip” opportunity for active traders.

Look for entry points at the $14 level, where the price finds support from a four-month uptrend line. In terms of trade management, consider placing a stop-loss order beneath the 50-day simple moving average (SMA). Think about booking profits on a retest of pre-pandemic high at $17.59.

For a look at today’s earnings schedule, check out our earnings calendar.

About the Author

Tim Smithauthor

Tim brings over 20 years’ of experience working at some of Wall Street’s biggest investment banks, including Goldman Sacks, Bank of America Merrill Lynch, Citigroup, and Morgan Stanley.

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