I think HP is a classic case of stock price manipulation /management. Over the last three weeks, the company in its discussions with analysts kept dropping hints of strong server and high end systems sales. This coupled with an daily partnership announcements with a variety of firms (i.e., increased visibility) propeled a 15+ points increase in the stock from the mid 60s to 80+. Now they drop the bomb on PC / Asia related sales and projected miss of the earnings figures by 10 - 15 cents, which is quite substantial. Note also that during the period of the run-up, the earnings estimates were not revised upwards, but analysts used esoteric reasoning termed as a "multiple expansion" to upgrade the stock. Even with an 11 point drop the stock is still higher than than where it was a month ago. So I guess everybody should be happy. (except the anlaysts who upgraded, and buyers in the 70s and 80s.) I wouldn't be surprised if there is a "multiple contraction" and the stock dritfs to the levels based on fundamentals (high 50 - low 60s)
SUNW stockholders had a similar experience in the middle of last year, when management hype and a flurry of announcements pushed the stock into the 50s. Investors have since been tepid to the stock, even though SUNW has done a good job of maintaining decent growth rates in a tough environment. If I am not mistaken, this is the 5the time in the last 8 quarters that HP has warned. I think it is fast on its way of becoming another MOT (talk a good game, puke at earnings time). By the way I bailed out of my HP position a a slight profit, once the "multiple expansion" started occuring.
Regards
Alok
PS SUNWs strategy of staying away from the PC hardware market, esp. if you can't be a DELL, appears to be sound. |
