An "outperform" rating on Hewlett-Packard doesn't mean the troubled PC maker is a good long-term bet," Toni Sacconaghi of Bernstein Research said Wednesday.
"I think they'll probably miss revenue pretty handily this quarter, and while some of that is built into expectations, the stock has fared very well year to date, and we could see the stock retrench," he said.
So why the bullish call?
On CNBC's "Fast Money," Sacconaghi explained it's about valuation.
"I do think this is a company that is the second-cheapest stock in the entire S&P 500, trading at six times earnings," he said. "It's not a good long-term story. I think everybody knows that. That's why it's trading where it's trading.
"That said, you can make a lot of money in rental stocks, and I think the rent for this is still too low. Ultimately, it's backstopped by a break-up valuation, which I think is about $30 a share."
Sacconaghi put normalized earnings at $4 a share, adding that earnings could grow modestly to bring the stock to a valuation multiple of about seven or eight.
"Net net, I'm a little cautious buying around the print, but if I have a six- or nine-month time horizon, I think that this stock still is in the middle innings of its revaluation," he said.
Trader disclosure: On May 22, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Steve Weiss is long BAC; Steve Weiss is long C; Steve Weiss is long BBRY; Steve Weiss is long F; Steve Weiss is long LCC; Steve Weiss is long UAL; Steve Weiss is long AAMRQ; Mike Murphy is long BAC; Mike Murphy is long INTC; Mike Murphy is long FB; Mike Murphy is long GE ; Mike Murphy is long F; Mike Murphy is long TOL; Mike Murphy is long ADT; Brian Kelly is long TREASURIES ; Brian Kelly is long TLT; Pete Najarian is long AAPL; Pete Najarian is long BAC CALLS ; Pete Najarian is long JPM CALLS; Pete Najarian is long WFC CALLS; Pete Najarian is long MS CALLS; Pete Najarian is long XLF CALLS; Pete Najarian is long INTC; Pete Najarian is long CSCO; Pete Najarian is long BBRY; Pete Najarian is long SBUX; Pete Najarian is long MSFT; Pete Najarian is long F CALLS; Pete Najarian is long PFE; Pete Najarian is long PFE CALLS.
