×

HP Shares: Bulls and Bears Make Their Case

Hewlett-Packard is the company up for debate in today’s Stock Brawl segment during CNBC's “Closing Bell.”

Since its start in 1939, HP has grown to be the world’s largest IT company, with revenue totaling $114.6 billion for fiscal 2009. The company ranked No. 10 in 2010 Fortune 500 and continues to expand with more than one billion customers in over 170 countries.

However, the recent resignation of Mark Hurd and other news has had a negative impact on the stock. HP shares are down nearly 8 percent since August 6.

Making Their Case: The Bear

Stephanie Links, Director of Research, TheStreet

Links says there are some uncertainties ahead for HP, although quarterly results were in line with estimates.

It's hard to see where HP is going without a clear leader in place. The "CEO overhang," as Links calls it, will hurt the stock and cause HP to "stay in a range" until it is resolved. Links insists HP needs to find a leader who will drive revenues and not just cut costs.

On the acquisition front, HP is paying up big time for the 3Par acquisition, a 149 percent premium to 3Par’s recent price, 33 percent higher than Dell. Links questions the dollar amount HP is offering 3Par.

As for valuation, Links is lukewarm because the stock is "not expensive but not cheap. Somewhere in the middle — not compelling, given the valuations of Apple, Cisco, EMC and others."

Making Their Case: The Bull

Paul Meeks, Equity Analyst, Capstone Investments

Meeks believes that, in typical fashion, HP has gone through a quarter in which they beat expectations and raised guidance. “That pattern will continue, because Kathy Lesjak is still there, and she’s responsible for it.”

He continues to say, “Timing for 3Par was bad from a PR standpoint, but the company has a track record of making good deals and they don’t want deal to have it.”

HP is making a lot of money, and the company has made a lot of good acquisitions in the last few years. It is a tightly managed tech company that is trading at a “ridiculous multiple.”

The company has a potential to grow a lot and this is a great buying opportunity. However, Meeks cautions that if there should be a double-dip recession, it could hurt tech.

Meeks says, “I bought some when the Hurd news hit the tape, and I’m thinking about buying more…You should be buying now with both hands.”

Crystal Lau contributed to this article.

____________________________
Stocks Mentioned in This Story:

Hewlett-Packard

Apple

Cisco

EMC

3Par

_____________________________

_____________________________

_____________________________


Questions? Comments? Write toinvestoragenda@cnbc.com