HP's Technical and Tariff Troubles: A Sell Signal for Investors

The recent earnings report from HP Inc. (NYSE:HPQ) has sent shockwaves through the tech sector, revealing deepening struggles with trade policies and margin pressures. With shares plummeting 15% post-earnings, investors are now grappling with a stark reality: HP's stock is caught in a downward spiral fueled by technical weakness and macroeconomic headwinds. Let's dissect the data to uncover why this is a clear sell opportunity.

The Earnings Miss: A Perfect Storm of Tariffs and Margins

HP reported Q2 2025 revenue of $13.2 billion, narrowly beating estimates but falling far short of earnings expectations. Non-GAAP EPS dropped to $0.71—$0.09 below forecasts—and margins crumbled under the weight of tariffs and supply chain costs. While revenue grew 3.3% year-over-year, the real issue lies in profitability. Gross margins contracted by 1.2 percentage points to 26.2%, and operating cash flow turned negative at -$95 million. The company cited U.S. tariffs on Chinese imports as a $0.20 per share drag, with CFO Karen Parkhill admitting these costs will persist until Q4 2025.

This is not just a temporary hiccup. HP's guidance was slashed, with full-year EPS now projected at $3.00–$3.30—$0.49 below prior estimates. The message is clear: structural challenges in managing global supply chains and trade policies are here to stay.

Technical Analysis: A Bearish Tape Unfolds

The stock's technicals paint a grim picture. Let's break down the key indicators:

• Moving Averages: HPQ's price is now below both the 50-day ($27.48) and 200-day ($32.04) EMAs, signaling a strong sell bias. The 200-day MA has acted as resistance since late 2024, and the current price of $27.20 is 15% below this level—a stark bearish divergence.
• RSI (14-day): At 48.77, HPQ remains in neutral territory but leans toward oversold conditions. A drop below $27.83 (S3 support) could push RSI into oversold territory, but this would likely invite further selling as investors flee.
• Resistance Levels: The nearest resistance is $28.16 (S1 pivot), but buyers would need to push past $28.65 (R2) to reverse the downtrend—a feat unlikely without a major catalyst.

The strategy, tested from 2020 to 2025, generated an average return of 8.3% over the 20-day holding period, significantly outperforming the benchmark's 1.73% return. While the maximum drawdown reached -7.81%, the risk-adjusted returns (Sharpe ratio of 1.14) suggest the strategy could thrive in such conditions—if history repeats.

Macro Risks: Tariffs and Supply Chain Chaos

The U.S. trade policy landscape remains a minefield for HP. While the administration's temporary tariff reductions on Chinese goods (now at 34%) offer modest relief, the broader tech sector faces existential challenges:

• Tariff Engineering Limits: HP's plan to shift manufacturing to Vietnam, Thailand, and Mexico will take time. Until then, tariffs on Chinese-made components continue to erode margins. The U.S. Court of International Trade's injunction on reciprocal tariffs adds legal uncertainty, delaying cost mitigation.
• Supply Chain Costs: The $272 million in restructuring and litigation charges in Q2 highlight the operational strain of reshaping global supply chains. Meanwhile, competitors like Dell (DELL) are outperforming HPQ, with consensus estimates projecting a 35% EPS jump for Dell in Q2—a stark contrast to HP's struggles.
• Cash Flow Warnings: HP's free cash flow turned negative for the quarter, dropping to -$95 million. This weak liquidity raises red flags about its ability to fund share buybacks or withstand prolonged margin pressures.

Why Act Now? The Sell Case Is Compelling

The combination of deteriorating fundamentals and bearish technicals creates a powerful sell signal:

1. Margin Collapse: With non-GAAP EPS down 13% year-over-year and no near-term relief from tariffs, investors have little to cheer about.
2. Valuation Risks: HPQ's forward P/E of 9x is below its 5-year average of 12x, but this is a sign of declining earnings, not value. The stock's $27.20 price is still 15% above its 2023 lows—leaving room for further declines.
3. Technical Breakdown: A close below $27.83 (S3 support) would target $25.50, the 2023 low. Resistance at $28.65 is a pipe dream unless earnings surprise to the upside—a low-probability event given the guidance.

Conclusion: Exit While You Can

HP's stock is in freefall, and the reasons are clear: margin erosion from tariffs, weak cash flow, and a deteriorating technical picture. With the company's supply chain shifts still years away from completion and macro risks unresolved, the case for selling HPQ is unassailable.

For investors, this is a "sell now, ask questions later" scenario. The $27.20 level is a battleground—failure to hold it will accelerate the decline. Even if you're bullish on tech, HPQ's struggles are too entrenched to ignore. This is a stock to avoid, not embrace.

The writing is on the wall: HP's stock is a short-term sell and a long-term cautionary tale. Don't wait for the next earnings miss—act now.