Analysts Grow Cautious on HPQ and FL Stocks Ahead of Earnings

FL options traders are expecting another huge earnings move

Aug 20, 2019 at 10:03 AM
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Tech stock HP Inc (NYSE:HPQ) and retailer Foot Locker, Inc. (NYSE:FL) will both be in the earnings spotlight later this week, and both names received downbeat analyst attention this morning. As such, let's take a look at the shares of HPQ and FL to see how Wall Street is approaching each companies' upcoming quarterly report.

Citigroup downgraded its opinion on HP stock to "neutral" from "buy" and trimmed its price target to $21 from $25. In the note, the analysts said the PC business could remain strong in the near term, but the outlook for HPQ's printer segment isn't as clear, with business partner Canon slashing projections coming into the quarter. Citi also mentioned that macro risks could weigh on the company in 2020.

HP will report earnings after the close on Thursday, Aug. 22, and options traders have remained interested in calls ahead of the event. For instance, the 10-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 3.35, ranking in the 78th annual percentile -- pointing to bullish expectations from speculators.

The shares are down 2% this morning at $18.83, holding near 52-week-low territory after being rejected near the 200-day moving average earlier this month. Over the past year, the equity is down nearly 22%.

Switching gears to Foot Locker, the stock's price target was trimmed by Susquehanna to $46 from $52, though even this represents a premium to today's price of $39.47. This comes after yesterday's price-target cut to $62 from $73 at B. Riley. The majority of analysts still have "strong buy" recommendations on FL shares, even though they've given back more than one-fourth of their value in 2019.

A large chunk of those losses came back in May following the retailer's last earnings release, when the security dropped 16% the day after reporting. With the company set to report again before the open on Friday, Aug. 23, the options market is betting on another big move, pricing in a 19.9% swing. Meanwhile, peak open interest in the September series is at the 45 call.

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