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Don't Bet on Sustained Cash Flow Growth at Hewlett-Packard (HPQ)

April 8, 2013 11:43 AM EDT Send to a Friend
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Price: $31.93 --0%

Rating Summary:
    15 Buy, 18 Hold, 6 Sell

Rating Trend: Up Up

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Deutsche Bank today maintained a Sell rating on Hewlett-Packard (NYSE: HPQ) with a price target of $12.00. Analyst Chris Whitmore warned that expectations about sustained cash flow growth could be overly optimistic and the recent rally could come to a quick end.

"HPQ has rallied after the company beat F1Q cash flow expectations and investors raised expectations that its $5B FCF target for FY13 is too conservative (buy side expectation at $6.5-7B+, we believe $5.5-6.0B is more realistic)," said Whitmore.

Whitmore noted that Hewlett-Packard's January quarter has unique characteristics and expressed concern that investors who extrapolate the company's recent cash flow performance into future periods could be disappointed.

"Simply put, we believe 2/3+ of Hewlett-Packard's profit and cash flow remains in structural decline (PC, Printing, BCS, TS, etc); and restructuring alone cannot reposition these assets for sustained growth. As a result, we believe HP's recent rally could become derailed by future CF disappointments,” concluded the analyst.

For an analyst ratings summary and ratings history on Hewlett-Packard (NYSE: HPQ) click here. For more ratings news on Hewlett-Packard click here.

Shares of Hewlett-Packard closed at $21.97 yesterday.




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