I wish I could run a company into the ground and still be rewarded with a $49 billion market capitalization. That is the current value of Hewlett-Packard (HPQ).
The company tied to the personal computing and printing market has seen its shares double in value since November. New CEO Meg Whitman appears to be pulling all the right strings.
Watching her work reminds me of the carnival barkers for the freak show.
Step right up and buy your shares. We are going places you would not believe.
Of course once you have your ticket and get inside do you see the bearded lady with her painted on facial hair or the gorilla man who is wearing a gorilla suit.
It is not real people and neither is the recovery at Hewlett Packard.
How can it be?
The personal computer is dead and not coming back any time soon. Hewlett Packard was way late to the tablet party dashing any hope of staying on the cutting edge of technology.
Analysts expect the company to make a healthy profit of $3.57 in the current fiscal year ending October 31, 2013, but that number is expected to stay flat in the following year. At current prices the stock trades for 7 times next year’s earnings.
The problem is that earnings are going to fall if anything in the near term. What is on the horizon to change that?
If you want to know how the Hewlett Packard story ends just look at Dell (NASDAQ: DELL). That computer maker is having a heck of a time finding its way into private hands at a price that will satisfy current investors.
What those investors fail to realize that any value now is likely to surpass what is coming down the road.
The same is going to play out for Hewlett Packard.