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Here’s Why Valuation Around Hewlett-Packard Company (HPQ) May Remain Depressed


Hewlett-Packard Company (NYSE:HPQ) reported earnings that missed expectations and offered a sales outlook that was well below Wall Street forecasts, sending shares plunging 9.5 percent. After reviewing the report, Cantor analyst Brian White reiterated a Hold rating on the stock, and reduced the price target to $39 (from $35), which represents a potential downside of 9 percent from where the stock is currently trading.

White noted, “Last night, HP reported 1Q:FY15 results (ended January) with sales falling short of our projection and pro forma EPS meeting our estimates, while the company’s 2Q:FY15 and FY:15 pro forma EPS outlook is well below our estimates. Also, HP cut its FY:15 EPS projection to a range of $3.53-3.73 from $3.83-4.03 and lowered its free cash flow outlook to $3.5-4.0 billion from $6.5-7.0 billion. With 65% of HP’s sales generated from outside of the U.S., the company is clearly feeling the impact of a strong U.S. dollar on both the top line and EPS. As such, we are cutting our EPS estimates and lowering our 12-month price target to $35.”

Bottom line, “Given the challenges across HP’s portfolio and increased competition across the IT landscape that is undergoing significant secular shifts, we believe the valuation around the stock will remain depressed.”

Analyst Brian White has a total average return of 21.2% and a 75.9% success rate, according to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform. White has a -49.4% average return when recommending HPQ, and is ranked #12 out of 3483 analysts.