HP Enterprise’s Stock (NYSE: HPE) Under Pressure, Analyst Sees Many Issues

Hewlett Packard's stock (NYSE:HPE) is continuing it's descent, with 52 week lows of $14.85 again coming under threat as the price falls below $15. This morning's pre-market is showing no let up from the bears, with HPE 0.73% down in the session.

Whilst price action is not everything, particularly when taking place separate to fundamentals; when downwards pressure accelerates with financial releases, there could be more at play than market dynamics. Operationally the company has failed to hit it's mark in recent earnings, experiencing a significant drop of more than 15% following the release of their fiscal Q1 report, which included disappointing guidance projections.

The IT firm's fiscal Q1 adjusted earnings per share (EPS) were reported at $0.49, slightly missing the analysts' consensus estimate of $0.50.

In its guidance, Hewlett Packard Enterprise forecasted a Q2 adjusted EPS between $0.28 and $0.34. This figure falls short of the Wall Street consensus estimate of $0.50. Moreover, the company provided a full-year EPS outlook between $1.70 and $1.90, also below the market's expected $2.13.

Despite the stock's decline, the company's revenue performance in Q1 showed positive results. The revenue increased by 16.3% to $7.85 billion, which surpassed the expected figure of $7.81 billion. Notably, server revenue rose by 29% to $4.3 billion; however, profitability measures were less encouraging, with the operating profit margin decreasing to 8.1% from 11.4% the previous year.

In recent days, Daiwa downgraded HPE to Neutral, seeing the year “starting with many issues” for the firm. Daiwa cut their EPS forecast to $1.80 (was $2.14), and slashed their price target on the stock to $16 (was $25).

HPE's stock has now fallen 29.72% year-to-date, and with the $16 level having proven key at various stages now broken, eyes look to the next levels. The range from mid $14-$15's could be one to watch for a further move in either direction.

In an effort to improve operational efficiency and potentially counter the negative market reaction, Hewlett Packard Enterprise announced a cost-saving plan aimed at reducing expenses by $350 million over the next three years. Additionally, the success of its proposed acquisition of Juniper could lead to further savings of $450 million.

Whether these will prove enough to turn the tide of sentiment is as yet unknown, but with the stock now down at multi year lows, we may see some battle lines being drawn between the bulls and bears in the weeks ahead.