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Hewlett-Packard's Still Out of the Game

NEW YORK ( TheStreet) -- In an interview Wednesday morning on CNBC, Hewlett-Packard's (HPQ - Get Report) CEO Meg Whitman defended her decision to keep desktop computers as part of HP's long-term growth strategy. She insisted that "desktops are not dead." Quite a claim given that a recent report from Gartner suggested that global desktop shipments have sunk to their lowest level in five years.

I suppose until global desktop shipments reach zero, Whitman is technically correct. But it doesn't appear as if Hewlett-Packard's recent results support her optimism -- at least not where it matters most. This prompted me to call Hewlett-Packard a value trap back in September, in an article that caused quite a bit of controversy over my harsh criticism of management.

Although HP was then coming off what I considered a decent but not great quarter, I still believed there was at least $3 upside to the stock, which was then trading near $22. That said, I had no confidence that current management had what it takes to harvest any meaningful value out of the stock on a long-term basis.

[Read: Could HP Make Trouble for Other 3D Printing Stocks?]

Fast-forward three months later. The stock is trading around $27.30, or 10% higher than my fair-value target of $25. The company's better-than-expected fourth-quarter earnings were a surprise. At the same time, I don't believe HP is in better position today than it was three months ago or even a year ago. Rather, the company just high-jumped over a low bar. And I would caution about getting excited here as it seems management has already broken a recent promise.

First and foremost, let's compare HP to Dell, Intel (INTC) and Microsoft (MSFT), which are all considered PC-dependent businesses and perpetually accused of dying. I won't deny that HP stock, despite having gained 95% on the year, has always been cheap. That was my argument three months ago when HP's then-P/E of 6 assumed that the company wouldn't grow at all.

Plus, after Cisco's (CSCO) horrific first quarter, which included nightmarish guidance, the Street was eager to glorify HP's beat, making it appear bigger than it really was. The stock, which was already cheap, seemed even more attractive.

But as the Street has been known to do, it has conveniently forgotten why shares of HP became so depressed in the first place. And contrary to popular opinion, I don't believe this sudden rash of excitement in the stock is because HP is on a new path to long-term growth.

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