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H-P, on Deck, Is a Buy

H-P is expected to post strong first-quarter results after market close, presenting plenty of upside for investors.

PALO ALTO, Calif. (TheStreet) -- Hewlett-Packard (HPQ) - Get Free Report is expected to post a strong quarter when it reports its first-quarter results Tuesday, and its stock is being heavily touted as a good buying opportunity for investors.

The company's numbers, to be released after market close, come hot on the heels of

strong results from rival IBM (IBM) - Get Free Report

, and Wall Street is hopeful that H-P will continue this trend.

Analysts surveyed by Thomson Reuters expect H-P to report revenue of $30.01 billion and earnings of $1.06 a share, compared to sales of $28.8 billion and earnings of 93 cents in the same period last year.

But last month, H-P's shares suffered a slump with the broader sell-off in tech stocks, and currently are trading at just over $49. Set against this backdrop, analysts say that H-P could spell upside for investors.

"We are buyers of the stock on what we view as an attractive valuation and expectations of an improving IT spend environment through 2010," wrote Jayson Noland, an analyst at R.W. Baird, in a note released on Tuesday. H-P, he explained, is trading at 11 times R.W. Baird's 2010 EPS estimate, excluding amortization, which represents a discount of 22% compared to the S&P500.

"We recommend building or adding positions in shares of overweight-rated Hewlett-Packard," added Mark Moskowitz, an analyst at J.P. Morgan, in a note released on Wednesday. "Early signs of 'all systems go' should lift the stock."

Moskowitz raised his H-P price target from $58 to $59, explaining that the company remains his top pick, alongside


(AAPL) - Get Free Report

, in IT hardware this year.

"While improving printer hardware installs could weigh on margins, we believe that better than expected revenue and margin trends in PCs, servers/storage, and IT services should provide suitable offsets," he added.

With companies refocusing attention on their data centers after a period of tight IT spending,

H-P is bolstering its efforts around key areas such as networking


Last year H-P surprised the tech sector when it

bought networking specialist 3Com (COMS) - Get Free Report

for $2.7 billion in an attempt to

challenge rival Cisco (CSCO) - Get Free Report


open up new revenue streams in the booming Chinese tech market.

H-P, which gained European Union approval for the 3Com deal this week, is also expected to reap the benefits of the rebound in tech spending.

Analyst firm

Goldman Sachs has already identified 2010 as a big year for H-P

, boosted by services, storage and networking.

"We expect H-P's Enterprise Storage and Servers (ESS) division to benefit from a data center hardware refresh and see the company as a server market share taker," added Noland, in his note. This would increase the pressure on the likes of IBM and


(ORCL) - Get Free Report

, which

recently completed its acquisition of Sun


H-P, one of the TheStreet's top tech picks

for 2009, posted

strong fourth-quarter results

, and has


a return to

a return to growth this year


The tech bellwether, alongside


(DELL) - Get Free Report

, is also expected to tap into

booming demand for netbook computers


Noland, however, warns that there are still pressures weighing on H-P's PC business.

"We expect commodity input costs and Average Selling Price (ASP) degradation to force some gross margin pressure which should be somewhat offset by share gains," he wrote. "We continue to expect better days for enterprise PC sales in the second half of calendar 2010, though not an accelerated enterprise refresh."

-- Reported by James Rogers in New York


>>Hewlett, Net-App on Deck

>>H-P Closing in on 3Com: Report

>>H-P, Dell Feeling Netbook Love: Survey

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