Cramer's Calls on Hewlett-Packard, Dell
Listen up, home gamers! Cramer is confident you can manage your money better than the professionals, so long as you do your homework and stay diversified. After all, he said the professionals aren't as smart as you think.
To illustrate his point, Cramer referenced Dell and Hewlett-Packard . On Tuesday, H-P delivered a disappointing quarter and cut its sales and earnings estimates for the remainder of the year. Yet none of the analysts, who cover the stock seemed to have saw this coming, Cramer noted. Since its earnings report, 17 analysts who cover H-P have cut their price targets — that's after the stock plunged 5.6 percent immediately after its earnings came out. Cramer said it's interesting none of these analysts took down their forecasts before the quarter.
To Cramer, it doesn’t seem as though H-P has any direction. It talked about some structural softness in its consulting and technology business, a line Cramer said analysts swallowed "hook, line and sinker." Yet neither Accenture or IBM has reported any weakness in these areas, leading Cramer to believe H-P's problems might be specific to them. H-P has a huge infrastructure outsourcing business thanks to its acquisition of Electronic Data Systems, only that area is on a secular decline. Cramer thinks analysts should have saw that coming before the quarter.
When it comes down to it, H-P belongs on the "Sell Block" because of all the excuses it's been making, Cramer argued. The company's chief financial officer, for example, stated in her opening remarks that the Japanese earthquake was worse than expected. But nobody else blamed Japan, Cramer said. IBM said there wasn't much of an impact while Dell didn't even mention it. Until H-P sorts out its problems, Cramer said it's a "sell, sell, sell."
Cramer said Dell, on the other hand, is a "buy, buy, buy."
"As wrongly positive as the analysts were on Hewlett-Packard, they were every bit as mistakenly negative on Dell," Cramer said, noting that after the tech company reported a positive quarter after Tuesday's close, ten analysts responded by raising their price targets. "Again, not very useful. Would’ve been nice if somebody had upgraded Dell before it reported. Thanks for nothing."
Even as analysts raise their numbers, Cramer doesn't think they understand just how well Dell is doing. After all, its operating income grew by 67 percent while its gross margin climbed by 23.4 percent. Dell has transformed from a company with too much exposure in personal computers to a company that's focused on enterprise solutions. Yet many analysts aren't' recognizing the shift and don't think its results are sustainable. Cramer doesn't expect the analysts to believe in Dell until after it reports another solid quarter and they're forced to raise their numbers in response.
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