Go Against The Grain On Hewlett-Packard

Sep. 5.12 | About: HP Inc. (HPQ)

If you enjoy hot air and lost-shot hopes, then Hewlett-Packard (NYSE:HPQ) may be the stock for you. If not, you'll want to go against the grain and give up recently felt hope for the stock, which was up well over a half a percent in trading yesterday, after a full week of poking its head up when it should be headed down further.

HP's computer and printer business used to be lock-safe, but now it suffers untold trials and suffering. They are getting edged out by both low-priced and high-end producers, from Lenovo to Apple (NASDAQ:AAPL), while the PC business itself turns dodgier by the day.

Going forward, all that is sustaining the stock price over the past week, stands…a distant notion that luck will turn.

Heaps of hope rest in the form of former EBay (NASDAQ:EBAY) chief and political aspirant Meg Whitman who, with one eye on the company and another on politics, in turn hopes against hope to turn the company into the second coming of IBM (NYSE:IBM). Or Apple.

The problem is self-evident. IBM had a cultural history of transitions, while HP has a recent pattern of endless lurches. There was only one Steve Jobs, so his long-ago turnaround of Apple is singular and cannot be mimicked, or even taken in vein.

Moreover, there is not a solitary sign that any initiative -- from a re-revived tablet to IBM style consulting -- is enjoying any traction.

Yet the stock rose yesterday and has hung in there in the past week, when it should be headed downward. HP is trading near an eight-year low and is only propped above it thanks to those undeserved hopes.

Don't touch this stock with a 39 1/2 foot pole until you see a sign of life on the top line. Sure: they can show some incremental earnings growth, through firings and other costs savings measures. But in the quarter, revenues are expected to come in at $32.18 billion, a drop of well over 4% from last year's October quarter. Yearly estimates aren't all that much better. The signs of a sustainable turnaround are in top line vibrancy and there are no signs here.

Yet hope abounds.

A recently bullish article even centered on the fact that seasonal strength is reason enough to buy Hewlett-Packard.

In making the case for hope, the article, like many, spoke in general terms of "fits and starts" in turnarounds. Problem is, there have been only fits at HP. No starts.

Make no mistake about it. Despite the past week, Hewlett-Packard, like Dell (NASDAQ:DELL), are in for many fits and seasons of challenge. The stock should be lower, waiting out the distant chance of a turnaround at a firm 10-year low, which is why we are, all told, going against the grain and suggesting selling HP.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.