Arik Hesseldahl

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HP Shares Tank on Outlook and Analyst Downgrades

Shares of Hewlett-Packard have fallen by more than 6 percent this morning, as the markets have taken their time to think over the implications of the company’s third-quarter earnings report yesterday.

While HP had more or less teed up the expectations for the nearly $10 billion in one-time charges that led in turn to the largest single-quarter loss in its history, it was the outlook and description of a long, arduous and painful turnaround process that is giving investors fits.

Meanwhile, analysts have piled on with a batch of downgrades: Kulbinder Garcha at Credit Suisse cut his price target to $25 from $30 a share, which, when compared to the estimate of other equities research outfits, looks downright sunny.

Brent Bracelin at Pacific Crest Securities slashed his estimate of HP’s fiscal 2013 revenue by more than $2 billion, and said he sees a possibility for the shares to hit $16, which would be lower than the $16.50 price it hit in 2004. “HP could remain challenged on multiple fronts as it attempts to transform an increasingly challenged business model and exposure profile,” he wrote.

Chris Whitmore of Deutsche Bank Securities, already an HP bear with a “sell” rating, lowered his price target even further, to $15 a share. Whitmore, in a note to clients today, was having none of the reassuring message coming from HP CEO Meg Whitman and CFO Cathie Lesjak on yesterday’s conference call. “Barring a significant change in strategic direction, we anticipate protracted declines in HP’s three major businesses to continue, making sustained growth in cash flow and EPS challenging,” he wrote. “That said, management is likely to reinvest headcount reduction and related cost savings to improve HP’s competitive position over the long haul. However, these investments will take time and it is unclear when these investments will translate into better product positioning. We estimate 24-plus months.”

As of 11 am ET, HP shares are trading at $17.94, down $1.26, or more than 6.5 percent.


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— Gitesh Pandya of BoxOfficeGuru.com comments on the dreadful opening weekend box office numbers for “The Fifth Estate.”