On the last day of the quarter, Wells Fargo analyst, Aaron Rakers, was out with a bullish note on Hewlett Packard Enterprise (NYSE: HPE). This was a gutsy move on a company whose stock had fallen more than 50% from November through two weeks ago and was trading within a dollar of its all-time lows. However, the analyst took a longer-term view and argued that the company’s ability to capture market share in the enterprise computer space, in the wake of a coronavirus driven technology shift, makes them an attractive stock to buy and hold. The company’s rating was raised
from Equal Weight to Overweight while a $14 price target was slapped onto its stock.
Considering shares were changing hands below $8/share at last month’s low, long term investors would do well to sit up and take notice.
Given that HPE shares have been trending down since November while the S&P 500 was printing regular all-time highs, there obviously had been some pessimistic sentiment creeping into the share price. As markets were slammed in what was the worst Q1 in history, HPE took it’s beating in turn. Many eyebrows were raised and fingers pointed at the company’s heavy leverage but Rakers has pointed out that this is too simplistic a criticism. The company’s $12 billion of debt is mostly tied to its HP Financing Services operating segment and so has a strong portfolio backing it up. In a note to client he said, "while our estimates reflect our expectation that HPE will face significant fundamental pressures, and we would fully expect ongoing investor questions/concern over the impact of enterprise workload migrations to public cloud, we believe this is more than adequately discounted in our adjusted estimates and the current valuation".
In essence, the stock price has been unfairly beaten down and investors are getting a bargain at these prices.
Many of us will remember first coming across the Hewlett Packard brand and logo on some of the first mainstream personal computers to hit the market in the early 1990s. In the years since, the company has undergone many changes and pivots, all the while adapting to new technology. In 2015, the company was split up into HP Inc. (NYSE: HPQ) and Hewlett Packard Enterprise (NYSE: HPE). The former kept the original company’s ticker and stock price history and had its business centered around PCs and printers. The latter was focused on the enterprise product business and financial services offerings. As we continue the march into a new decade, HPE generates revenue from some of the most modern technologies of today that are a crucial part of many other companies’ tech stacks. Think data storage, networking solutions, servers, information management, data security and digital investment consulting.
Technicals Are Strong
In the four years since the split, through the end of 2019, the two HP stocks were largely correlated in their movements. The fact that they’ve since diverged might give Wall Street another reason to consider the long case. Since the start of 2020, HPQ shares are down 18% while HPE shares are down 37%. It might be a simplistic argument to make but in tandem with the value and opportunity being espoused by Rakers, the risk/reward skew for HPE is definitely attractive here.
Shares have strong support around the $8 level where buyers consistently stepped in back in 2016 and last month. The stock’s RSI has also moved out of the teens, suggesting that the current wave of selling is sputtering out while the MACD had a bullish crossover last week, confirming that the bulls have started to take control for now at least. The cherry on top is that there’s also an attractive 4.9% dividend yield to keep investors happy while the stock continues its recovery.
6 Gambling Stocks Ready For a Rebound
If you didn’t believe that gambling stocks are a worthwhile investment, consider this. The Business Research Company projects the global gambling market to reach $565.4 billion through 2022. That assumes that the industry will continue growing at is annual rate of 5.9%.
The gambling industry is composed of many segments. There are casinos, lotteries, and the now legalized segment of sports betting. But gambling is also broken down into offline gambling, online gambling and even virtual reality gambling. In fact, virtual reality gambling is projected to grow at an annual rate of 21.5% until 2022.
But virtual reality is only one of a number of emerging technologies that are changing the “traditional” face of the gambling industry. There are now hybrid games – the combination of online and land-based games and even augmented reality games.
And don’t forget about fantasy sports. Fantasy sports has created an entire industry and it wasn’t created for one person to have bragging rights over their buddies. Fantasy sports is a multi-million industry.
But like many other segments of the economy, gambling stocks were hit hard by the Covid-19 pandemic. Not only were casinos closed, but live sports were also put on hold. This dried up many of the traditional avenues of gambling, and gambling stocks sank lower as a result.
However, the global economy is starting to re-open. And while it was thought that casinos would be one of the last to come back, there are casinos that are starting to re-open. And, it’s becoming more and more likely that there will be live sports (likely without fans initially) sooner rather than later. And that will open up the fantasy sports market.
These stocks tend to move quickly. So now is the time to take action. That’s why we’ve created this special presentation that highlights 6 gambling stocks that are ready for a rebound. The sell-off was real, but so will the comeback. And when it does, these stocks may cost much more than they do now.
View the "6 Gambling Stocks Ready For a Rebound".