"The greater than 50% rally in HP's stock over the past seven weeks has been impressive and driven by a plethora of factors, but none that we believe are based in reality," he wrote in a note released Friday. "As such, we believe the stock is close to running out of steam and we remain sellers at these levels."
The beleaguered tech giant has been thrust into the spotlight recently. HP's shares spiked on Wednesday following a news report that potential purchasers are evaluating the company's Autonomy and EDS units.
A spokesman for HP told TheStreet that the company doesn't comment on speculation.There have been plenty of rumors, though, about HP carving off parts of its business. In a recent regulatory filing with the Securities and Exchange Commission, HP said it will "continue to evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives." White, however, believes that the buyout talk swirling around rival Dell (DELL) has fuelled HP M&A chatter, lifting its shares. "Given the current legal issues surrounding Autonomy after HP called out improprieties at the company, we can't imagine that any rational buyer would pay much for this business," White wrote. "While services have been challenged in recent quarters, selling off EDS seems a bit extreme and unlikely to happen in the near term, especially when this business makes sense with HP's enterprise portfolio. We don't expect a major, near-term transformation at HP." Also, this week's weak guidance from tech bellwether Intel (INTC) hardly bodes well for HP, highlighting pressure in the PC market. There had been hopes that Microsoft's (MSFT) Windows 8 launch would boost the PC business, although that is yet to materialize, according to White. "Intel's call last night provided a subtle reminder that demand is not off to the races just yet," he wrote. The analyst also notes that HP's restructuring challenges and "stretched balance sheet" make it more vulnerable to competition from IT heavyweights such as IBM (IBM) and Cisco (CSCO), as well as EMC (EMC) and Oracle (ORCL).
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV