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Stick to Sidelines Ahead of Hewlett-Packard Earnings: Analyst

Investors should stick to the sidelines on Hewlett-Packard ahead of its Thursday earnings report, said one analyst.

Jeff Fidacaro, senior equity research analyst at the Susquehanna Financial Group, told CNBC that while the cut in Dell's revenue outlookwould “impact a lot of the larger-captechnology names,” he's keeping a "neutral" rating on H-P. Susquehanna also has a "neutral" rating on Dell.

Fidacaro said that growth in the HP's PC business was “particularly at risk” from the slowdown in consumer spending and enterprise spending, but said not all of the Dell's troubles apply to rivals in the industry.

There are “very Dell-specific issues within the down numbers, as they transform their company. They’re culling low-margin business,” said Fidacaro, pointing to Dell’s winddown of the use of third-party EMCclouddata storage.

On the earnings conference call, Dell Chief Financial Officer Brian Gladden said most of the remaining EMC storage business has been transitioned to Dell technologies. In response to an analyst question on the company's below-target growth during the transition, Gladden said that by the end of the year “we should be in positive storage growth overall.”

As investors wait for H-P’s earnings announcement on Thursday, Fidacaro said while the company's valuations "may look compelling," it still has to go through "a couple of quarters of transformation in their services business."

"We’d rather own names that have a catalyst on top of the attractive valuation," said Fidacaro.

But Gleacher & Co. analyst Brian Marshall told CNBC in an interview that the stock was potentially a "coiled spring."

"We think H-P’s been left for dead," said Marshall, who called the stock's valuation anemic. "If we see any signs of life whatsoever we could have a nice pop higher," he said.

Marshall also said that the company could be worth more if it split in two. "It would make sense "to have a higher-growth, higher-margin company that’s focused on enterprise, and have a lower-growth, lower-margin company that’s focused on consumer," he said.

H-P's future would not be dictated by consumer devices, and reports that H-P's tablet device wasn't selling well were "immaterial," said Marshall.

Jefferies & Co. analysts are calling H-P a "buy," saying the computer hardware maker has a compelling valuation.

Jefferies said Friday that while disappointing back-to-school sales have intensified weak consumer spending on PCs, enterprise spending continues. Jefferies added that HP faces four to six quarters of investment in tablets and cloud services to offset the cannibalization of its PC, server, and services businesses.

Jefferies raised its fiscal 2012 earnings estimate for H-P to $5.98 per share from $5.83 per share, and set a $40 stock price target.

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CNBC Data Pages:

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Disclosures:

Susquehanna Financial Group is a market maker in the securities of Dell and Hewlett-Packard.

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