Sentiment Gives Way to Reality as HP Shares Crash on Goldman Downgrade

Published on April 2, 2013
by Arik Hesseldahl

reality_bites2-featureShares of computing giant Hewlett-Packard are getting whacked pretty hard today in the wake of a significant downgrade by Goldman Sachs analyst Bill Shope.

In a research note to clients today, Shope wrote that “sentiment has moved ahead of reality” on HP shares, which before today had risen by more than 110 percent from a mid-December low of $11.35, to close Monday at $23.84. Today, the shares are down by more than 5.2 percent, and hit $22.09 as of 11:10 am ET.

Shope’s statement is the inverse of what HP CEO Meg Whitman has been saying about the state of the company in recent public comments. “The narrative lags the reality,” is a phrase she’s used often in public comments, such as in an interview at The Wall Street Journal’s CIO Network conference earlier this year. The point was to argue that shareholder sentiment had yet to catch up with an improvement in HP’s fortunes, and it was bolstered somewhat by HP’s first-quarter results.

Shope argued that weak PC sales will continue to drag on any improvements that HP sees in other lines of its business, including server sales, as well as operational improvements brought about by HP’s numerous restructuring moves. He took his price target down to $16, and rated the shares a “sell.”

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