This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

HP's Stock Rally Is 'Running Out of Steam'

NEW YORK ( TheStreet) -- Investors should be careful about owning HP (HPQ - Get Report) shares, warns Brian White, an analyst at Topeka Capital Markets.

"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 - Get Report) 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 - Get Report) and Cisco (CSCO - Get Report), as well as EMC (EMC - Get Report) and Oracle (ORCL).

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
DELL $0.00 0.00%
CSCO $27.13 0.15%
EMC $25.17 -2.48%
HPQ $31.49 -1.62%
IBM $160.40 -0.12%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs