Consider Hewlett-Packard, because its printers won't go out of style

Posted Aug 20th 2009 3:50PM by Joseph Lazzaro
Filed under: Hewlett-Packard (HPQ), Stocks to Buy

Did you a get chance to establish a position Hewlett-Packard back in April? If you did, you're up about 20%, and the future looks even better.

I'm Reiterating my Buy rating for Hewlett-Packard (NYSE: HPQ), first recommended on April 24, 2009 at a price of $35.80.

Hewlett is well-positioned to increase market share in PCs, servers, printers, and IT services. The company's cost reduction efforts have gone reasonably well, and it's made progress re-positioning its customer services operation to become the one-stop shop that many customers seek. Meanwhile, the integration of Electronic Data Services, acquired for about $13 billion, should go smoothly. The First Call FY2009/FY2010 EPS estimates for HPQ are $3.80 to $4.21.

Further, with a P/E of 10, this will likely be your last chance to earn an outsized gain with HPQ. Heck, Hewlett's durable printer business practically warrants a P/E of 10 itself.

Stock Analysis: Hewlett-Packard is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in HPQ now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your HPQ position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $18.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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Reader Comments (Page 1 of 1)

8-21-2009 @ 10:24AM

ritaf said...

Before you recommend HP because of its products here's two thoghts to ponder. Call for customer support. I did three times today. Put on hold 16 minutes, 24 minutes and 33 minutes. When I finaly talked to someone they coud hardly speak english and put me on hold which disconnected. Have you been buying HP printer cartridges lately? Our staff is convinced that the cartridges have less ink these days. That means millions of dollars in increased revenue - pretty tricky!
We have a good hundred HP printers in amongst our staff. Today I issued an order that we will no longer purchase HP printers and will implement an orderly phaseout working with a competitor interested in its customers. seems like HP has lost its luster.