HPQ Struggles After Revenue, Forecast Miss

HP posted an earnings beat, but revenue that fell short of estimates

HP Inc (NYSE:HPQ) is off 7.8% at $15.79 after last night's fiscal second-quarter earnings report. The tech company posted earnings that beat analysts' estimates, but revenue that missed the mark. HP's current-quarter forecast also came in below expectations, while it withdrew its 2020 outlook amid coronavirus-related uncertainties.

The event definitely drew some analyst chatter. No fewer than three brokerages lowered their price targets, including J.P. Morgan Securities to $20 from $21. The analyst also lowered its rating on HPQ to "neutral" from "overweight." One outlier, Deutsche Bank, lifted its price target by $1 to $18.

This puts the consensus 12-month price target at $17.69, which is a 16.2% premium to current levels. Coming into today, just four analysts considered HPQ a "strong buy," compared to nine that called it a "hold" or worse.

It has been a struggle for HPQ on the charts. The security has tried to distance itself from its March lows, but found resistance at the $18 level late in the month. Since then, the stock's sideways trading has been mostly contained by the $14 and $16 regions, with a recent breakout above here thwarted by the 80-day moving average.

Already, options are flying off the shelves. In the first hour of trading, 19,000 calls and 9,534 puts have exchanged hands -- four times what is typically seen at this point. The weekly 5/29 15.50-strike call is the most popular, with positions being opened here, while the most popular put is the June 15 contract.

Typically, bulls rule the roost, per HPQ's 10-day call/put volume ratio of 11.73 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the 95th percentile of its annual range. This means long calls have been picked up at a much quicker-than-usual clip in the last two weeks.

Short interest sellers, meanwhile, are jumping back on the bearish bandwagon, with short interest up 5.3% in the last two reporting periods. There's still plenty of room for these bears. The 18.85 million shares sold short represent just 1.3% of HPQ's available float. However, it should be noted that HP has landed itself on the short-sale restricted (SSR) list today.