This Day On The Street
Continue to site right-arrow
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!

Are HP Shares a Value Trap or Turnaround Growth Play Among Tech Stocks?

Chris Lau, Kapitall: Tech stocks like HP have to adapt quickly. Is this giant among PC makers ready for 2014?

When Hewlett-Packard ( HPQ ) disclosed an increase in its layoff plans, the news pleased investors. HP is continuing to look for ways to turnaround operations by generating organic growth.

And it looks like investors may keep pushing HP shares higher, but maybe that’s an indication that this is the right time for a reality check. Is HP a value trap, or a turnaround growth story?

Shares rebound

HP is up 36% from October 2013, closing recently at around $28.30:

Click on the interactive chart to see stock price over time. Sourced from Zacks Investment Research.

Growth is organic

HP will be eliminating 34,000 workers in fiscal 2013. The 5,000 increase in layoffs will add another $400 million in write-downs. The aggregate charges will be around $4.1 billion. If the cuts come from management and engineering levels, then HP could save $100,000 per employee, on average. This would reduce costs by a sizeable $500 million annually.

Bullish investors could point to the solid performance in HP stock in past years as evidence that growth could be expected in the future. Some of the recent rise in the stock could be attributed to quantitative easing by the US Federal Reserve. For comparison, the S&P 500 (SPX) and the NASDAQ 100 (COMP) are up sharply since 2012:

Click on the interactive chart to see stock price over time. Sourced from Zacks Investment Research.

Growth potentials

HP will probably rely on enterprise services, software, and hardware sales for growth in 2014 and beyond. Sales for PCs are getting better for HP, but mobile phones and tablet device sales will outpace PC demand overall in the foreseeable future.

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!


DOW 18,128.56 +31.66 0.17%
S&P 500 2,103.38 +4.85 0.23%
NASDAQ 4,990.1220 +22.9810 0.46%

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