Did you a get chance to establish a position in Hewlett-Packard (HPQ) back in April? If you did, you're up a nice 39%. But the equally comforting news is that there's still considerable upside ahead for HPQ, which is why I'm reiterating my buy rating for the company, 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 reasonably well.
The qualifiers? Corporate IT budgets are not flowing like they did earlier this decade, and that represents a hurdle for HPQ. Still, at the end of the day, the quality/durability of Hewlett's products -- particularly its printers -- along with some room-to-play-with on prices should enable HPQ to keep revenue increasing at a decent clip in the immediate years ahead. The First Call FY2009/FY2010 EPS estimates for HPQ are $3.81 to $4.28.
Technically, Hewlett's stock chart is beautiful: a staircase -- one in which the stock continually stays above the key, 50-day moving average -- a sign that institutional investors are adding to their HPQ positions. There will be psychological resistance at the $50 level, then two-year resistance around $53, but these will prove to be minor: HPQ is headed north.
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 25% position in HPQ now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your HPQ position before December 2009. Sell/stop loss if you were to buy shares in this company: $18.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Closing Bell: Earnings working against stocks (BCRX, DELL, DHI, INTC, LEAP, PCS)
Chasing Value: E-Trade, a word of caution
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