Hewlett-Packard (NYSE: HPQ) is
one of the world's largest information technology (IT) companies, providing a broad array of personal computers, servers, storage devices, networking devices, printers, operating systems and software applications. The firm also offers a portfolio of multi-vendor technology, consulting, integration and outsourcing services. Dell (NASDAQ: DELL) and IBM (NYSE: IBM) are major competitors.
Hewlett-Packard pleased the Street last week, when it reported fiscal Q1 EPS of 86 cents and revenues of $28.47 billion. Analysts had been looking for 81 cents and $27.6 billion. Management also guided Q2 EPS to 83-84 cents (82 cent consensus), Q2 revenues to $27.7-$27.9 billion ($27.43B consensus), FY08 EPS to $3.50-$3.54 ($3.36 consensus) and FY08 revenues to $113.5-$114.0 billion ($111.7B consensus). The CEO cited "anticipated cost reductions and share gains in key markets" for the favorable outlook. AmTech Research, UBS and Caris subsequently reiterated "buy" recommendations and declared price targets in the $54-$58 range.
The stock
price popped on the news and has since been defining a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers now recommend the issue with eleven "strong buys", eleven "buys", four "holds" and one "sell". Analysts see a 16% average annual growth rate, through the next five years. The stock's P/E ratio (16.21), PEG ratio (1.05), Price to Sales ratio (1.12), Price to Book ratio (3.19), Price to Cash Flow ratio (11.36), Price to Free Cash Flow ratio (13.37) and EPS Growth rate (32.31%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 80% of the outstanding shares. The stock is one of those used to calculate the Dow Jones Composite, the Dow Jones Industrial Average, The S&P 100 Index and the S&P 500 Index. Over the past 52 weeks, it has traded between $38.15 and $53.48. A stop-loss of $40.90 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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