Canaccord Genuity Morning Coffee on Guess (GES) and Hewlett-Packard (HPQ): Does Anyone Initiate Bearish Coverage?
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Price: $16.81 --0%
Rating Summary:
4 Buy, 9 Hold, 5 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
4 Buy, 9 Hold, 5 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Canaccord Genuity Morning Coffee on Guess (NYSE: GES) and Hewlett-Packard (NYSE: HPQ): Does anyone initiate bearish coverage?
Canaccord analyst said, "Credit Suisse initiated bullish coverage of H-P, suggesting the personal computing giant will realize higher margins if it continues to shift from mostly hardware into more enterprise storage, service and networking (ESSN) offerings. The firm’s proprietary IT demand forecast suggests that when compared to GDP growth or to corporate profits, IT services are being under-consumed globally, providing a backdrop for accelerating revenue growth. It sees H-P gaining share in this area, given positive exposure to faster-growing emerging markets and a robust end-to-end offerings. Even allowing for share declines in servers, Credit Suisse believe that end-market growth in storage, combined with the ramp of networking should drive sustainable margins. Alongside current cost saving plans, increasing ESSN focus could drive F11/12 segment margins to 15.5-16.0% and to more than 17.0% by F14 (15.8% in F10). Accordingly, Credit Suisse suggested three moves for H-P's leadership to consider: 1) Re-invigorate the software segment, which contributes only 5% to profit and is a tenth the size of IBM's (NYSE: IBM) software business, through hiring and M&A. Here the company's projected cumulative FCF of $65 billion over the next five years offers flexibility; 2) Drive an all-out price war to accelerate share gains in networking at Cisco's (Nasdaq: CSCO) expense, since segment margins, though lower than Cisco's, are materially accretive to H-P's 24% gross margins; and 3) Consider exiting the PC business in light of its commodity status and limited strategic benefits. As for valuation, Credit Suisse sees compelling upside potential. H-P currently trades at a P/E of 6.9x versus the firm’s C12 EPS, versus peers Dell (Nasdaq: DELL) and IBM at 9.2x/10.8x, and relative to the stock's five-year historical multiple of 12x."
Canaccord analyst said, "Credit Suisse initiated bullish coverage of H-P, suggesting the personal computing giant will realize higher margins if it continues to shift from mostly hardware into more enterprise storage, service and networking (ESSN) offerings. The firm’s proprietary IT demand forecast suggests that when compared to GDP growth or to corporate profits, IT services are being under-consumed globally, providing a backdrop for accelerating revenue growth. It sees H-P gaining share in this area, given positive exposure to faster-growing emerging markets and a robust end-to-end offerings. Even allowing for share declines in servers, Credit Suisse believe that end-market growth in storage, combined with the ramp of networking should drive sustainable margins. Alongside current cost saving plans, increasing ESSN focus could drive F11/12 segment margins to 15.5-16.0% and to more than 17.0% by F14 (15.8% in F10). Accordingly, Credit Suisse suggested three moves for H-P's leadership to consider: 1) Re-invigorate the software segment, which contributes only 5% to profit and is a tenth the size of IBM's (NYSE: IBM) software business, through hiring and M&A. Here the company's projected cumulative FCF of $65 billion over the next five years offers flexibility; 2) Drive an all-out price war to accelerate share gains in networking at Cisco's (Nasdaq: CSCO) expense, since segment margins, though lower than Cisco's, are materially accretive to H-P's 24% gross margins; and 3) Consider exiting the PC business in light of its commodity status and limited strategic benefits. As for valuation, Credit Suisse sees compelling upside potential. H-P currently trades at a P/E of 6.9x versus the firm’s C12 EPS, versus peers Dell (Nasdaq: DELL) and IBM at 9.2x/10.8x, and relative to the stock's five-year historical multiple of 12x."
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