Taking a Closer Look at Hewlett Packard Stock as Earnings Loom

Year-over-year, HPE sports an over 33% lead

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The shares of Hewlett Packard Enterprise Company (NYSE:HPE) are trading just below breakeven this afternoon, last seen down 0.1% to trade at $14.75, just one week ahead of the tech name's fiscal fourth-quarter earnings report, which is due out after the close on Tuesday, Nov. 30. Below, we will further explore HPE's recent performance on the charts, as well as some of its previous post-earnings activity, to determine where it may be headed next.

It has been a tumultuous year for Hewlett Packard stock. The security recently tumbled from the $15.90 level, which also turned down a rally back in June. The 40-day moving average, which served as a floor for the shares in October, is now acting as resistance as well. Year-over-year, though, HPE still sports a 33.2% lead.

HPE 40 Day

The equity has a mixed history of post-earnings reactions, finishing four of eight next-day sessions higher in the last two years, while the other four were lower, including an 11.5% drop in May 2020. Options traders are pricing in a 7.1% swing for HPE this time around, which is substantially higher than the 3.8% move it averaged after its last eight reports, regardless of direction.

A shift in the options pits could create tailwinds for the equity. This is according to the HPE's Schaeffer's put/call open interest ratio (SOIR) of 1.21, which stands higher than 94% all other annual readings, suggesting short-term options traders have rarely been more put-biased. 

From a fundamental point of view, Hewlett Packard's biggest issue in recent years has been its inconsistent top- and bottom-line growth rate. Despite HPE’s trailing 12-month revenues and net income having increased $656 million and $1.35 billion, respectively, since 2020, revenues and net income have fallen 10.4% and 46%, respectively, since 2018. 

However, the security promises decent long-term returns through dividends and stock appreciation. Although Hewlett Packard stock currently trades at a price-earnings ratio of 18.87, it also has forward price-earnings ratio of 7.16, indicating a significant increase in earnings is expected, reflecting a much better valuation.

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