HPQ Scores Pre-Earnings Bull Note From Citigroup

The equity is coming off a record high of $36

Deputy Editor
May 24, 2021 at 10:38 AM
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The shares of HP Inc (NYSE:HPQ) are 1.8% higher this morning, trading at $32.24, following an upgrade from Citigroup to "buy" from "neutral." The analyst cited strong demand for PCs, adding that it doesn't see demand rolling "off to pre-pandemic levels once supply constraints ease." 

The security has seen a solid run higher during the past 14 months. In fact, HPQ just hit an all-time high of $36 on May 10, trouncing its previous peak touched over 20 years ago in April 2000. Though its cooled since then, the stock's 70-day moving average has helped contain most of this pullback, keeping the security at a roughly 90% 12-month lead. 

Analysts remain cautious, which could lead to even more bull notes, should HPQ maintain some of this upward momentum. Coming into today, just three analysts in coverage called the stock a "strong buy," compared to six that said "hold" or worse. What's more, the 12-month consensus price target of $31.69 is a 1.8% discount to current levels. 

A similar sentiment can be seen at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). HPQ sports a 10-day put/call volume ratio of 1.52, which stands higher than 92% of readings from the past year. This means long puts have been much more popular than usual of late. Echoing this, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.78 stands in the top-most percentile of its annual range, implying short-term option traders haven't been more put biased during the past year. 

It should also be noted that HP has its fiscal second-quarter earnings report due out after the close on Thursday, May 27. Looking back at the stock's post-earnings moves over the past two years, HPQ has enjoyed positive next-day sessions five out of eight times, though it did suffer a 12.3% drop this time last year. Regardless of direction, HPQ has averaged a next-day return of 5.1%, slightly lower than the 9.9% swing the options pits are pricing in this time around. 

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