Seeking Alpha
Profile| Send Message| ()  

Hewlett-Packard (HPQ) is a company under hard times. After it lost its cost-cutting CEO Mark Hurd, the company's stock fell. Then after buying Autonomy for $10.3 billion dollars on August 18th, 2011, Hewlett-Packard's stock fell a lot more. The market did not like the fact that it paid a 64% premium for a company whose organic growth prospects were suspect and P/E over 40. More importantly, Hewlett-Packard had to suspend its $10 billion stock buyback, which in many ways was propping the stock up.

In response, the market has grouped Hewlett-Packard more with the forsaken dogs of Research In Motion (RIMM) and Nokia (NOK) than with companies in it's sector like Dell (DELL) or IBM (IBM).

In terms of current financials, Hewlett-Packard is still a great company. At its current price of $21.26, it has a P/E of 8, but a forward P/E of 5. Hewlett-Packard has still affirmed its approximately $4 earnings per share numbers for this year and next.

Hewlett-Packard also recently announced layoffs of 8% of its workforce which amounts to an annual savings of 3 to 3.5 billion dollars by 2014. While it is extremely unfortunate to Hewlett-Packard's workers and may mean that HPQ will miss some opportunities down the road to increase revenue, the news is a net positive in terms of EPS. The move should bump up HPQ's earnings per share by at least $1 annually.

Perhaps the biggest argument for buying shares of HPQ is that insiders are buying HPQ in very large numbers. One of Hewlett-Packard's Board of Directors recently bought over 13 million shares of HPQ at $22.47. The total cost of almost $300 million shows that the board is very confident of Hewlett Packard's future prospects.

To be fair, the 20 and 50 day, 200 day moving averages are still down and there might be some 'Grexit' scenario that causes the market to swan dive, which will take Hewlett-Packard along with it. The board of directors who bought $300 million of stock most likely has a long term view of the company and didn't buy for a quick bounce.

That being said, HPQ has seen an intermediate up trend start from the approximate $20 level on Sep 23rd, 2011 on very high volume. For all the traders/investors who think that this bounce from $20 is similar, then maybe HPQ might be a buy today.

Source: Hewlett-Packard: A Good Company For The Long Term