Analyst calculates HP’s stock, should be negative-$2
On Wednesday, HP CEO Meg Whitman stunned a group of analysts, at an investor’s conference in San Francisco, by announcing that the company would see its earnings fall by 10% or more next year. Following that announcement, HP’s stock hit a 10-year low. It was well known that the company was facing serious challenges, but this announcement took the wind out of the sails.
Enter Shaw Wu, an analyst with Sterne Agee, he was known as one of the few that felt HP still warranted some benefit of the doubt. After the announcement, his position changed to neutral. He then reviewed HP’s balance sheet and described it as awful. So awful, the company’s stock is really worth negative $2. “They are fortunate the stock’s not zero,” said Wu.
Echoing Whitman’s sentiments that the challenges are structural, stemming from the merry-go-round of executive leadership over the past couple years, Wu added that the company’s PC unit is not effectively competing with mobile devices, Windows 8 sales will be weak, and that the printer business, once the shining star of HP, was dying.
Like we noted at the beginning, HP’s announcement this past week was a blood-letting in Wall Street terms, and investor sharks are nary very forgiving.
source: Business Insider
1. CamaroSS (Posts: 31; Member since: 24 Jul 2012)
Seriously? HP's PC division alone is worth over 35 billion USD. Analysts these days will say anything to grab some attention.
2. Maxwell.R (Posts: 117; Member since: 20 Sep 2012)
Unfortunately, that is not the case. The whole company's value has dipped below $30B based on market cap value. Some of what Wu was saying was certainly over the top, such as the goodwill writedowns will probably not be that drastic, but even if they were, that is a one time event.
3. CamaroSS (Posts: 31; Member since: 24 Jul 2012)
Well, market cap is not the true value of a company as it's based on highly volatile stats. Actual buyout value of a company with falling stock values always turn out to be more than double/triple of the market capital. For a company like HP it'd be even higher. Take Nokia for example with a current market cap around $10 billion. That doesn't mean that anyone can buy them out for $10 or even $20 or $30 billion dollar as there is little incentive for the current major stockholders to approve the deal.
4. Maxwell.R (Posts: 117; Member since: 20 Sep 2012)
If that were the case, then T-Mobile USA would be paying a lot more than $1.5B for a 74% stake in the combined company with MetroPCS whose market cap is $4.6B. In terms of "ownership" the value of the stock reigns supreme. The volatility you cite occurs when the price of the stock is measured against the debt of the company. Nokia could easily be acquired in a hostile leveraged $20-30B buyout. What prevents that is their current negative margins in every category. That is not a bad position for Nokia since it obviously wants to regain its footing and not be bought out. But if one or two major institutional investors and major holders of the company floated the idea of selling out, it would be difficult for the company to resist since employees and executives typically do not hold enough ownership to thwart such measures. HP's acquisition of EDS was not a significant premium above its market cap. You make a valid point, but the days of a 200-300% mark-up for acquisitions are not viable in the current climate.
7. CamaroSS (Posts: 31; Member since: 24 Jul 2012)
I looked up metro PCS news. Did you notice that cash is not the only payment Tmob is making? They are combining debts as well. Besides,
"Under the terms of the agreement, MetroPCS shareholders will receive $1.5 billion in cash and 26% ownership in the MERGED company. Deutsche Telekom will receive a 74% stake." :)
You're right about the climate and we both are right about the major stockholders approval requirement. Neither of us can predict what they are gonna do :)
5. xXMAKESHIFTXx (Posts: 38; Member since: 28 Jul 2012)
If only they would finally put out that tab/laptop! I know I am not that critical of a thinker but when I saw that snip I got excited and told myself that is my next purchase!
6. AppleConspiracy (Posts: 627; Member since: 18 Oct 2011)
It's nothing weird. HP is falling for a time now, needs to get back to mobile in post-PC era.
I'm always amused when I hear of analysts become stunned by those facts.
8. CamaroSS (Posts: 31; Member since: 24 Jul 2012)
Read it over, buddy. HP was doing just fine without mobile. Wasting one billion to get into mobile and couple bad acquisitions to become the next IBM overnight are the main culprits. Getting back into mobile will simply make it worse for them.
9. AppleConspiracy (Posts: 627; Member since: 18 Oct 2011)
It will make it worse for them, but there again staying where they are will make it worse for them too (wait, that already happened). It's choosing the lesser evil. The paradigm in which HP was an IT giant is deconstructing and shifting where HP doesn't hold the right strings.
All of this was easily visible even two years ago when HP gave up on mobile, when they said, I quote: "This is Apple's domain, we have nothing to do here".
10. snowgator (Posts: 3149; Member since: 19 Jan 2011)
There is no doubt that the previous 2 CEO's have destroyed any structure that HP had built. It is a horrid situation, one that will be a long time and much pain climbing out of. Any attempt to get this company back on track is two years in the making. What a fall.
11. pikapowerize (banned) (Posts: 1869; Member since: 03 May 2012)
its because of leadership!
but come on!! they're still on the top!
12. Reluctant_Human (Posts: 753; Member since: 28 Jun 2012)
A good CEO is worth his weight in gold. A horrible one is sadly worth just as much plus a compensation package.
13. downphoenix (Posts: 2134; Member since: 19 Jun 2010)
I know HP hasn't been doing as well as it could be doing, but wall street analysts are no more reliable than snake oil salesmen. Actual value or revenue of a company is not nearly as relevent as fear and speculation when it comes to stock markets.