HPE Stock Topples Key Trendline After Double Upgrade

BofA-Merrill Lynch upgraded HPE to "buy" from "underperform"

Managing Editor
Oct 21, 2019 at 9:49 AM
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The shares of Hewlett Packard Enterprise Co (NYSE:HPE) are up 3.3% to trade at $15.85 this morning, after BofA-Merrill Lynch issued a rare double upgrade on the tech firm. The brokerage firm upped its rating to "buy" from "underperform," and set a price objective of $19 from $13. The brokerage firm waxed optimistic about the company's free cash flow  (FCF), commitment to stable growth, and its Intelligent Edge/Aruba products.

This is set to be HPE's third straight win, and eighth in the past nine trading days. But today's gains are notable because they take the shares past the $15.40 level -- an area that has served as a stiff ceiling the last three months. HPE stock is cruising toward its highest close since May 2, and has now cleared its year-over-year breakeven point. 

For a stock with a modest 16% year-to-date gain heading into today, analysts have been skeptical. There are 15 brokerages covering HPE, and 11 rate it a "hold" or worse. Plus, the consensus 12-month price target of $16.14 is right in line with its current perch. 

Short sellers continue to ramp up their exposure, with short interest increasing by 32.5% in the most recent reporting period to 45.95 million shares, the most in two years. At the stock's average pace of trading, it would take almost a week for shorts to buy back their bearish bets.

Those looking to bet on the tech stock may want to consider options. The equity's Schaeffer's Volatility Index (SVI) is currently at 28%, which registers in the 26th percentile of its annual range -- indicating short-term options are attractively priced at the moment, from a historical volatility perspective.

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