Barclays Reinstates Coverage on Hewlett-Packard (HPQ) at Equalweight; Execution Challenges Point to Discount to SOTP

Barclays reinstates coverage on Hewlett-Packard (NYSE: HPQ) with a Equalweight. PT $25.00.

Barclays analyst said, "We are reinstating our rating for Hewlett-Packard, resuming our Equal Weight rating (Our EW was suspended as of 8/18 due to Barclays Capital's involvement in the Autonomy deal). While it's hard to be negative on HP given its P-E valuation, it seems like a discount to the sum of its parts is warranted. We believe shares could be range bound until we get more clarity around true earnings power. While shares appear "cheap" on a P-E basis, HP trades in line with many companies in our sector on a TTM FCF basis. We believe that indecision around the PC business may create more volatility around results, and the software and services businesses have not yet been optimized to a point where the company can live without PC's."

"We are reinstating our estimates below consensus as uncertainty regarding plans for HP's PC business may be impacting market share and the company continues to face execution issues in its services business. We estimate non-GAAP EPS of $1.12 (consensus is $1.13) and revenue of $31.8B (consensus is $32.1B) for 4Q11. For FY12 we estimate non-GAAP EPS of $4.13 (consensus is $4.76) and revenue of $125B (consensus is $127B). Also, for FY13 our non-GAAP EPS estimate is $4.23 (consensus is $4.84) and our revenue estimate is $125B (consensus is $130B)."

For more ratings news on Hewlett-Packard click here and for the rating history of Hewlett-Packard click here.

Shares of Hewlett-Packard closed at $23.02 yesterday.

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