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HPQ Stock: The Hewlett-Packard Turnaround Is Just Beginning

HPQ stock has been on a tear lately, and there's plenty more where that came from

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At this time last year, many investors figured Hewlett-Packard (HPQ) was a lost cause. Though the value of HPQ stock grew a bit in early 2013, it was tough to think that the rally was anything more than just a little volatility. After all, HP had just booted its CEO after a year at the helm, and that bounced followed a three-year, 79% implosion for HPQ stock.

Hewlett-Packard logoWell, as it turns out, the upside wasn’t just a little volatility. HPQ stock is up a solid 36% over the past twelve months, having hit a new 52-week high this past week.

It looks like HPQ finally found a CEO was the right person for the job. While revenue hasn’t technically grown under CEO Meg Whitman’s leadership, it’s no longer deteriorating. Ditto for earnings. And, while revenue for HPQ stock is projected to be essentially flat this fiscal year as well as in fiscal 2015, analysts expect per-share profits to ramp up again, to the tune of 4.2% this fiscal year, and 3.5% next year.

It may not be redhot growth, but HPQ stock owners have more to look forward to now than they’ve had in years. The million dollar question is, can Hewlett-Packard possibly live up to these new lofty expectations?

The answer, perhaps surprisingly, is yes.

HPQ Is the Real Deal

Last week’s announcement from HPQ that it would venture into the 3D printing game is undoubtedly big news. But, it wasn’t the reason another batch of buyers fell in love with HPQ stock enough to push it to new highs. The reason HPQ stock has continued to make bullish (albeit erratic) progress since early 2013 is that Hewlett-Packard has continued to execute Whitman’s three-pronged plan.

The first goal was to build products consumers want rather than products you want them to want. The second was to manage costs, even if it means killings products. And the final, and most important, goal was to become a premier name again in the enterprise-level market, capitalizing on the company’s ultra-energy-efficient “Moonshot” server technology.

Smart efforts on all three fronts have paid off. In a post-earnings interview with The Wall Street Journal in February, Meg Whitman was asked how HPQ managed to grow its PC sales by 4% in the previous quarter. Here’s how she responded”

“…Our multi-operating system, multi-form factor strategy and focus on new segments has been key to the success. We grew 8% in the commercial business. That is where the profit is made. We have to take share in the commercial side.”

Growth of its enterprise-level business? That’s right in line with prong No. 3 of the aforementioned three-pronged plan. Products with the choices of guts and operating systems that buyers want? That falls under the first part of Whitman’s three-part mission noted above. Hewlett-Packard also won a contract with the Department of Defense earlier in this month, underscoring the idea that enterprise is the key to the budding turnaround for Hewlett-Packard and HPQ stock.

Article printed from InvestorPlace Media,

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