Investors are wondering if the worst is finally over for Hewlett Packard Enterprise, even though the stock is sporting just a fraction of the gains it boasted in early Wednesday trading.
If the bulls can maintain some of this newfound momentum, a big rally could setup for HPE stock. While it will take time, today's report could pave the way to further gains in the coming months and going into year-end.
Earnings of 45 cents per share came in 5 cents ahead of expectations, but revenue of $7.22 billion missed estimates by $70 million and declined 7% year-over-year.
Ordinarily, a tech company would have trouble rallying on a declining revenue figure that misses expectations. In the case of HPE, though, investors are overlooking the sales miss as margins grew in the quarter and after management raised its full-year earnings expectations. They now expect earnings in the range of $1.72 to $1.76 per share, better than the consensus view of $1.68 per share.
A company's outlook is quite important to its post-earnings price action. This observation is in full force Wednesday. Unlike Hewlett Packard Enterprise, AutoDesk (ADSK - Get Report) stock is under pressure on the day despite beating earnings and revenue expectations, after management cut its full-year forecast for both metrics.
Trading Hewlett Packard Enterprise Stock
A glance at the charts sends mixed signals to investors. Hewlett Packard Enterprise stock opened near the 20-day moving average and briefly penetrated what was prior channel support. The latter gave way in August, ushering in new lows in HPE stock for 2019.
Bulls need to see a move over $13.70 in the near term. That will get the stock back into its prior channel, a positive step even if the channel is trending lower. It's important because it sets up a possible run toward the $14 to $14.25 area. The latter marks a significant level over the past year and is also the 61.8% retracement for the one-year range. Over that range puts the 200-day moving average on the table.
Those who think this path will be easy are incorrect. When a stock has to fight through numerous levels of resistance, it's always going to be a battle for the bulls.
If Hewlett Packard Enterprise can deliver some upside results and better revenue growth, that will certainly help. It will also help if the stock market can shake this nasty case of tariff and recession worries, bringing buyers back to stocks.
Should HPE stock eventually push through these obstacles, range resistance near $16.50 is a possibility, up some 24% from current levels. If Hewlett Packard Enterprise stock fails to garner upside momentum, bulls' must-hold support level is $12.75.