Hewlett-Packard Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Hewlett-Packard (NYSE: HPQ  ) dropped 23% in intraday trading today after issuing disappointing guidance and revealing plans to "transform" the business.

So what: Third fiscal quarter non-GAAP EPS of $1.10 rose a modest 2% year over year and beat the $1.09 consensus estimate. Revenue of $31.2 billion grew only 1% year over year, helped by currency exchange rates.

Now what: Fasten your seatbelt: It's complicated. Management retracted guidance for fiscal year 2014, which it issued just last March. For the current quarter the company expects non-GAAP EPS of $0.44 to $0.55, well below the $1.31 consensus estimate. To transform the company, it's killing the tablet and smartphone hardware business it bought in July 2010 and hoping to salvage the webOS software that came with the $1.2 billion purchase. It's considering selling or spinning out its PC business and agreed to pay about $11 billion to buy software maker Autonomy. The transformation is expected to take a number of quarters and pressure earnings during that time. At a P/E ratio of 5.9 times, the stock may appear to be a great value, but it could well be a value trap.


Interested in more info on HP? Add it to your watchlist by clicking here.

Fool contributor Cindy Johnson does not own shares of any company named above. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 19, 2011, at 1:56 PM, Quaker08 wrote:

    Although HPQ's earnings guidance was abysmal, I think there is value in the shares at these prices. Additionally, I find it interesting that the market reacted so negatively to the PC spin-off situation. If this news broke one month ago, do you think the reaction would be the same? I seem to remember the market cheering any and all spinoffs in recent months(MRO, COP, KFT). I think people are looking through their worst case scenario glasses right now.

Add your comment.

DocumentId: 1541338, ~/Articles/ArticleHandler.aspx, 7/23/2014 8:27:24 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

TREND TRACKER: Get Rich When the Web Goes Dark

It's time to say "goodbye" to your Internet! One bleeding-edge technology is about to put the World Wide Web to bed. And if you act right away, it could make you wildly rich. Experts are calling it the single largest business opportunity in the history of capitalism… The Economist is calling it "transformative"... but you'll probably just call it "how I made my millions." Big money is already on the move. Don't be too late to the party – find out the 1 stock to own when the Web goes dark.


Advertisement