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
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

HP Has Plenty of Problems and Few Solutions

Stocks in this article: HPQMSFTCSCO

NEW YORK (TheStreet) -- Shares of enterprise giant Hewlett-Packard (HPQ) have been on an incredible run. But it can't do business indefinitely in a weak PC environment. Management must address the company's cloud and mobile strategies. 

At around $32.45, its shares are up 16% for the year to date. Since the stock bottomed at $11.71 in November 2012, the company has seen its value soar close to 200%, reaching a 52-week high of $33.90.

But from a value investment perspective, is there any value left in a company struggling with growth?

No one's going to deny HP has taken some meaningful strides under CEO Meg Whitman. But the company's core businesses are  decaying and too much has been made about the so-called stability of the PC industry.

Whitman has offered some positive remarks and an upbeat outlook. But PC growth, which makes up roughly 30% of HP's sales, isn't coming back. Making matters worse, Microsoft (MSFT), a once-proud OEM partner to HP, just released its third iteration of its Surface tablet. This, in my opinion, effectively kills off any hope that PC's might pull-off a late-stage rally. It isn't going to happen.

To date, whether in hardware, software or in the enterprise, there has been no meaningful growth at HP. The company's services and software divisions, which accounts for 42% of revenue, reported a decline in the recent quarter. Business conditions have not been all that great.

At this point, it's a mistake for investors to assume that a return to growth, which is presumed in the stock price, is imminent. There's still quite a lot of work for Whitman to do to fully realize this turnaround. With a resurgent Cisco (CSCO) looking more confident, any plan Whitman comes up with won't be easy to execute.

Hewlett-Packard will report its fiscal second-quarter report Thursday. The Street will be looking for 88 cents in earnings per share on revenue of $27.4 billion, which would represent a year-over-year revenue decline of 1%. Analysts have grown more optimistic, however.

Since the February quarter, revenue estimates have grown by $26 million. On a full-year basis, the Street is projecting earnings per share of $3.71 on revenue of $111.15 billion. Full-year revenue is expected to decline 1%, while earnings it expected to grow by more than 4%.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!

Markets

DOW 17,828.24 +0.49 0.00%
S&P 500 2,067.56 -5.27 -0.25%
NASDAQ 4,791.63 +4.3130 0.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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