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Sunday, March 31, 2013

HP Has $25 Written All Over It


Seeking Alpha

HP Has $25 Written All Over It

Mar 6 2013, 10:32  | 9 comments  |  about: HPQ
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
HP (HPQ) priced at $20 this week making good on my prediction. So where do we go from here? To $25, of course.
The reasoning:
1. HP might just find David and Bill's garage again and do some real fine innovative work again. Look at HP's recent commitment to R&D, something that was lacking for years. HP spent $3.4 billion on its research budget in 2012, higher than in the prior three years. It is moving a much higher percentage of its operating cash flow over to R&D. The investment is nice to see after years of R&D neglect.
(My data sourced from Qs and Ks.)
2. No more multibillion dollar "white elephants" like Autonomy and EDS. Good to her word, Meg Whitman has really sworn off HP's old shopaholic ways and stopped the overpriced M&A. Kudos to her. Again, the proof:
(Sourced from Qs and Ks.)
3. It's still cheap. Price to sales is a very modest 0.33. EV:FCF is a low 8.64. Both metrics are well-under its 5 year average. HP throws off a ton of cash. Free cash flow was $6.9 billion - remarkably high for a company with a market cap of only $40 billion.
HP has its mojo back again. My new price target: $25.
Additional disclosure: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
HPQ's management discussing earnings
Comments (9)
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  •  
    HP to $25??? No way, it's going to $40!! It'll get to $25 alone just on the shorts getting squeezed. Add all the improvements and potential of the company, wait 2 years and it'll hit $40.

    All those that slept on HP is kicking themselves now, glad HP is making money for me!!
    6 Mar, 10:50 AMReply! Report Abuse  |  Make Author's PickLike1
  •  
    then why dont you have a position in HPQ?
    6 Mar, 10:52 AMReply! Report Abuse  |  Make Author's PickLike0
  •  
    It is not how much goes into R&D, it is what comes of it! That has been the problem at HP for years, may be decades since the printer.
    6 Mar, 10:58 AMReply! Report Abuse  |  Make Author's PickLike0
  •  
    Tons of new tech coming from HP. Check out project moonshot.

    http://bit.ly/Yyl27D

    Servers that require 89 percent less energy, 94 percent less space, 63 percent less cost, and 97 percent less complexity.
    6 Mar, 11:41 AMReply! Report Abuse  |  Make Author's PickLike2
  •  
    Project Moonshot is a game changer that will destroy the competition. HP has been dominating the enterprise server market for over a decade, and they just keep getting better and better at it.

    HP is the best, most well rounded, enterprise IT hardware company in the world. Nobody else can compete as strongly as HP in all three of the big areas (servers, storage, and networking).

    HPQ will be back to $50+ a share, as it was just a few years ago. Investors that are patient enough to give it 2-3 years will make a ton of money.
    6 Mar, 02:34 PMReply! Report Abuse  |  Make Author's PickLike0
  •  
    $3.4 Billion spent and HP doesn't have a competitive tablet. There is a reason HP was at $12. The company is nothing but a $40 Billion ink vendor. People are quick to forget what started this rally in HP, it was falling earnings and sales that simply hadn't fallen as far as some expected. Now the focus is on stealing market share from Dell? Wonderful... The bigger-slice-of-a-shri... strategy has worked so well for so many in the past. When the momentum ends and the momentum players all try to exit at once (at the same time the shorts swarm it), watch out.
    6 Mar, 01:39 PMReply! Report Abuse  |  Make Author's PickLike0
  •  
    HP is devoting their resources towards enterprise hardware, not the commodity PC/tablet business. Check out the poster above with the link to Project Moonshot. That is where HP's R&D is going.

    I suggest you short HP since you think they are horrible.
    6 Mar, 02:28 PMReply! Report Abuse  |  Make Author's PickLike1
  •  
    HP already has an enterprise tablet and is coming out with a whole line of tablets this year.......next.....
    10 Mar, 01:51 PMReply! Report Abuse  |  Make Author's PickLike0
  •  
    get out while the getting is good. i sold everything on march 12th, bought in nov 2012 in the $13 range...
    13 Mar, 01:49 AMReply! Report Abuse  |  Make Author's PickLike1
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HPQ VS. ETF ALTERNATIVES
ETFsTODAY3 MTHS1 YRYTD
HPQ1.1%67.3%0%67.3%
RWL0.6%12.2%17.1%13.0%
EPS0.5%9.7%10.3%10.0%
PRF0.1%11.8%15.7%11.7%
SDY0.1%12.2%16.3%12.3%
IPK0.1%3.7%6.6%0.7%
SSO0%19.5%25.5%19.5%
XLK0%4.5%0.6%4.6%
SPY0%9.3%11.4%9.2%
DIA-0.2%10.4%10.7%10.7%
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