Investopedia: Hewlett-Packard Primed For An Overreaction Trade

It says something about today's market when a company that already carried relatively modest expectations gets hammered anew over a relatively small slip in guidance. Fair or not, that is the reality for Hewlett-Packard (NYSE:HPQ) - yet another tech greybeard that investors seem to want to pack off to glue factory. While it is true that Hewlett-Packard has challenges and deficits to correct, patient investors may want to be opportunistic here as the hot money cashes in their chips and moves on to the next idea.

A Sour Start To The Year
Hewlett-Packard impressed nobody with its fiscal first quarter results. Revenue rose 4% from the year-ago level, but fell 3% on a sequential basis. Unfortunately, that level was below even the bottom end of the analyst range for this quarter.

Although the company's servers, storage and networking business was strong - a good read-through for EMC (NYSE:EMC) and Juniper (Nasdaq:JNPR), but problematic for Cisco (Nasdaq:CSCO) - that was about it. Imaging and printing was not bad and seems to be outperforming Lexmark (NYSE:LXK) and Xerox (NYSE:XRX), but software performance was mediocre and computer and service revenue were quite disappointing.

HP is in decent company with its poor service results. IBM (NYSE:IBM) and Dell (Nasdaq:DELL) both had sluggish performance here recently. But the computer results are more concerning. HP's consumer computer revenue was down 12% and the company is not doing especially well in China. While some of the computer under-performance might be due to channel inventory issues ahead of the new Intel (Nasdaq:INTC) chip launch, it may also be the case that Apple's (Nasdaq:AAPL) iPad sales really are biting into the laptop market.


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