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
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

HP's Still a Value Trap

NEW YORK ( TheStreet) -- There is no shortage of experts when it comes to highlighting the problems facing Hewlett-Packard (HPQ - Get Report). As beaten up as the company looks, it's hard for me to ignore how attractive the stock still appears.

My problem is I have absolutely no faith whatsoever that this current management team can harvest HP's underlying value.

HP investors will likely disagree. As has been the case for most of the year, I expect they'll be very determined to share those opinions.

Here's the thing: There are two schools of thought when assessing what HP has been able to accomplish. It's foolish to give too much weight to what the stock has done this year without expanding the full view of where it's come from.

I won't deny the fact that the 58% surge we've seen this year in shares of HP has been impressive. But I disagree with the idea that somehow this affirms Meg Whitman's candidacy for CEO of the Year.

What I mean by this is, over the trailing 16 months, at best, the stock has traded flat. While the stock has, in fact, rebounded nicely from last November's low of $11.35, the third quarter's 8% year-over-year decline in revenue suggests HP's recovery potential is still as rocky as it ever was. In fact, I believe the company has taken a slight step backward.

Given HP's dire circumstances and what has been a perpetual restructuring operation, not much was expected going into the third quarter. But the company was also coming off two previous earnings reports where HP not only beat expectations but raised guidance. Essentially, by virtue of some "small victories," the company had, in effect, raised its own bar. So I won't apologize for having expected better results than those that came in merely in line with estimates.

To that end, given the year-to-date strong surge of the stock, I have to say the performance of every business segment, in my opinion, was a disappointment. This includes the 11% decline in PC revenue, which was not a surprise. But the 4% and 9% declines in printing and services, respectively, were much worse than I projected.

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
HPQ $34.02 -1.90%
AAPL $130.42 1.26%
FB $80.41 1.07%
GOOG $555.48 2.13%
TSLA $207.19 1.68%

Markets

DOW 18,214.42 -10.15 -0.06%
S&P 500 2,110.74 -3.12 -0.15%
NASDAQ 4,987.89 +20.7530 0.42%

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