HPE Moves Lower Despite Lofty J.P. Morgan Bull Note

The equity added 32% in the last three months

Digital Content Manager
Jan 15, 2021 at 10:53 AM
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The shares of Hewlett Packard Enterprise Co (NYSE:HPE) are down 0.2% at $12.67 at last check, despite J.P. Morgan Securities upgrading the tech concern to "overweight" from "neutral," and hiking its price target to $16 from $13. The brokerage firm said the equity is pivoting into recovery in enterprise IT spending, as Covid-19 vaccines become widely available and people return to work. Plus, J.P. Morgan noted that the acquisition of Silver Peak and move into the software defined wide-area network (SD-WAN) space was "well-timed," and should contribute to accelerating growth later this year.

On the charts, the security traded sideways for most of the past year. The shares recovered only slightly from a March 18, six-year-low of $7.44, but overhead pressure at the $12 mark dampened the security's June rally. Hewlett Packard stock finally broke through that level in early December, with support from the 10-day moving average. And in the last three months, HPE has added 32%. 

Analysts were hesitant towards the equity coming into today, leaving plenty of room for additional price-target hikes and upgrades moving forward. Of the 13 in coverage, eight carried a tepid "hold" or worse rating. Meanwhile, the 12-month consensus target price of $12.77 is a 3% premium to current levels.

The options pits lean overwhelmingly bullish. This is per the stock's 10-day call/put volume ratio of 40.42 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 97% of readings from the past year. This means calls are being picked up at a quicker-than-usual pace. 

That optimism sill rings true today. In just the first half hour of trading, more than 2,500 calls have already crossed the tape, which is three times the intraday average. Most popular is the monthly February 13 call, followed by the monthly January 2021 12-strike call.

For those looking to speculate on HPE's next move with options, now could be an ideal opportunity. The equity's Schaeffer's Volatility Index (SVI) of 35% sits in the particularly low 8th percentile of its annual range. In other words, options players are pricing in low volatility expectations right now.

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