Information technology solutions company Hewlett Packard Enterprise designs and sells servers, storage, and networking equipment, and provides technology services to help its large enterprise customers put together and deploy IT systems. HPE has software-defined IT offerings for private, public, and hybrid cloud environments, as well as technologies for industrial Internet of Things (IoT) applications.
While the group is not immune to current market challenges, it delivered solid sequential growth in the third quarter. This is reflective of a resilient portfolio that can meet a wide range of customer needs, with ongoing investments into these areas providing further strength and momentum. Longer term, the group may see an acceleration in growth should there be a quicker than expected recovery in IT spending.
Technically, the price appears to be in an incomplete ascending triangle pattern (see the black converging trendlines on the main chart as well as the insert). The ascending triangle pattern shows that demand for the stock is outstripping available supply (indicated by higher lows).
The share is also testing its 200-day simple moving average of ~$16.05 with a break above indicating that the long-term trend is bullish.
Fading downside momentum according to the Moving Average Convergence Divergence (MACD) histogram and the recent sideways trajectory of the On-balance volume (OBV) indicator, supports our bullish view.
Share Information
| Share Code | HPE |
|---|---|
| Industry | Technology Hardware & Equipment |
| Market Capital (USD) | 20.19 billion |
| One Year Total Return | 4.37% |
| Return Year-to-Date | 0.88% |
| Current Price (USD) | 15.74 |
| 52 Week High (USD) | 18.14 |
| 52 Week Low (USD) | 13.66 |
| Financial Year End | October |
| Relative Strength Index (RSI) forward calculations suggest that the share will be in overbought territory at $26, which classifies our profit target of $18 as realistic. We suggest a moderate capital at risk allocation for this trade. |
Consensus expectations
(Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 2.02 | 2.13 | 1.94 | 2.17 |
| Growth (%) | 5.64% | -9.00% | 11.59% | |
| Dividend Per Share (USD) | 0.48 | 0.48 | 0.51 | 0.55 |
| Growth (%) | 0.63% | 6.21% | 6.63% | |
| Forward PE (times) | 7.38 | 8.11 | 7.26 | |
| Forward Dividend Yield (%) | 3.07 | 3.26 | 3.48 | |
| While economic pressures may result in increased volatility, the group's growth prospects remain intact with medium-term earnings expectations relatively healthy. The stock holds a Beta of 1.12, which indicates that it is slightly more volatile relative to the overall stock market. | ||||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | AMT - Take profit (Close the position) |
CRM - Buy (Continue to hold) |
AMZN - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 178.19 | 211.84 | 138.07 |
| Current | 199.11 | 221.45 | 142.83 |
| Movement | 11.7% | 4.5% | 3.4% |
| The stock is approaching our profit target and we closed the trade to reduce portfolio risk. |
An ascending broadening wedge pattern remains of interest. The stock remains above its 200-day moving average. The trade idea is backed by the fading downside momentum.
Our profit target remains at $240 with a trailing stop-loss at $210.30. Exit the trade around 6 February 2024. |
A megaphone pattern remains of interest. The stock remains above its 200-day moving average. The start of upside momentum is encouraging.
Our profit target remains at $200 with a trailing stop-loss at $133.75. Exit the trade around 23 February 2024. |
| Share Name and position | KO - Buy (Continue to hold) |
LVS - Buy (Continue to hold) |
GILD - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 55.78 | 49.47 | 80.00 |
| Current | 57.15 | 49.12 | 74.52 |
| Movement | 2.5% | -0.7% | -6.9% |
|
The price has been consistently recovering within the lower range of an upward-trending linear regression channel. Although the price remains below its 200-day moving average, it is gradually nearing this level. This trade is a counter-trend strategy, supported by a decline in downward momentum.
Our profit target remains at $61 with a trailing stop-loss at $55. Exit the trade around 12 January 2024. |
The price appears to be counter-testing a bearish trend which remains of interest. The stock remains below its 200-day moving average. This trade is a counter-trend strategy, supported by a decline in downward momentum.
Our profit target remains at $58 with a trailing stop-loss at $46. Exit the trade around 7 February 2024. |
The stock remains below its 200-day simple moving average. Upside momentum has halted, which is a concern.
Our profit target remains at $97 with a trailing stop-loss at $73. Exit the trade around 19 April 2024. |
