Bear of the Day: Hewlett Packard Enterprise (HPE)
One of the big stories so far this year has been the incredible performance of the tech sector at large. Many of the big caps in this space have dominated the market, and have put up double digit percentage gains in the process too.
But, it hasn’t been that way for every name in the space. Take Hewlett Packard Enterprise (HPE) for example. Sure, the company had a spin-off so the chart for this year might look incredibly bad, but the recent earnings report and price performance signal that HPE investors might want to get used to seeing red in their positions.
Recent Earnings Report
Hewlett Packard Enterprise just released earnings, and the numbers left much to be desired from the company. Revenues plunged 12.5% for the continuing operations part of the business, and was led by a double-digit percentage slump in revenues for servers, storage, and a 30% slump for networking. Earnings were also pretty weak, as they easily missed estimates on the bottom line too.
And worst of all, things don’t appear as though they are going to be turning around anytime soon. Guidance was also sluggish, and it isn’t like the competitive pressures are going to diminish in the coming quarters either.
Analysts have already taken note of these trends and we saw several cuts to HPE’s consensus estimate heading into the report. And now, with the weak outlook and tough position against peers, it isn’t unreasonable to think that this trend will continue in the weeks ahead too. No wonder HPE currently has an ‘F’ growth score, and why we have a Zacks Rank #5 (Strong Sell) on the company too.
Other Choices
Though things aren’t looking great for HPE in the near term, there are plenty of other choices out there for investors. Sure, the computer integrated systems industry has a rank in the bottom 25%, but the tech sector has a rank in the top 40%. So, investors just have to look outside of HPE’s industry for some better options in the tech space.
In particular, the semiconductor market stands out as an area of strength in today’s market environment. Several industries have top ranks, including five of the top 25. A top choice worth considering could be Applied Materials (AMAT), as this stock has a Zacks Rank #1 (Strong Buy) rating.
Not only that, but the security has a ‘B’ for its VGM score, while it is expected to post solid growth on both the top and bottom lines. This could make it a solid choice for tech investors, and especially over the troubled Hewlett Packard Enterprise at this time.
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