HP Inc. (NYSE: HPQ) continues its impressive momentum, marking the fourth consecutive week of gains with a 2.83% surge in share prices on Wednesday, fuelled by the unveiling of the latest earnings report. The report, presenting a mixed picture, revealed a 6.5% year-over-year dip in revenue to $13.817 billion for the latest quarter. Despite this, earnings per share showed a robust 10% climb to $0.90, aligning closely with market expectations.
In the realm of Personal Systems, a segment totalling $9.4 billion, a downturn of 8% emerged due to softening demand in the PC market, further compounded by competitive pricing challenges. The Consumer PS side witnessed a slight 1% decrease, while Commercial PS took a steeper 11% plunge. Despite this, overall unit sales remained stable, with a 9% uptick in Consumer PS units counterbalancing the 6% dip in Commercial PS units.
Meanwhile, the Printing segment, amounting to $4.4 billion, also experienced a decline, slipping 3%. Market share shrinkage and decreased demand affected Consumer Printing significantly, plunging by 21%, while Commercial Printing faced an additional 4% reduction. This setback was exacerbated by a substantial 19% drop in total hardware units.
Looking ahead, although HP Inc. anticipates a lower non-GAAP EPS in the upcoming quarter, estimating a range of $0.76 to $0.86—falling short of market consensus—there’s a potential upside within the cyclical nature of the PC market. However, the slowdown in the printing business might restrain the company’s overall performance in the foreseeable future, posing a significant challenge to navigate.
Technical
On the 1D chart, an ascending channel has formed from the bottom of the prior downtrend, with the crossing of the 25-SMA (green line) above the 50-SMA (blue line) confirming the presence of buyers in the shorter term. However, the 100-SMA (orange line) resistance halted the momentum in the Wednesday session and could be a significant hurdle to cross as we advance.
At current levels, the first level of resistance to the upside is at $28.95. Should the share price cross this resistance again in the Thursday session, the 100-SMA at $29.23 could undergo a retest. With the Fibonacci midpoint and golden ratio not far away at $29.59 and $30.62, respectively, the bulls face some challenging hurdles to enforce a complete retracement of the prior selloff.
However, the RSI indicates potential divergence with the share price, which could indicate a pullback from its current levels toward support at $27.87. The dynamic support of the channel is at risk of a breakdown at this level, which could see the price trickling down toward $27.11 at the 25-SMA and $26.82 at the 50-SMA. At these pivotal support levels, the longer-term trend could be determined.
Summary
After a mixed earnings report earlier this week, HP experienced a notable 2.83% rise in its share price. However, resistance was met, forcing the price to retreat, which opened the door to a longer-term pullback toward $27.87 should the price fail to clear the $28.95 resistance in the upcoming sessions.
Sources: Koyfin, Tradingview, Reuters, HP Inc.
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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