Dow Jones soars above 23,000. Is it too stretched? >>> READ MORE

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

    View All  

The enterprise picture looks relatively rosy going forward, too. With IBM (IBM) getting out of the low-end server business by selling that business to Chinese computer company Lenovo, it’s likely Hewlett-Packard will be able to garner some new domestic business from buyers that explicitly want to deal with a U.S.-based supplier. That new business could be a great catalyst for HPQ stock.

Hewlett-Packard has also beefed up its mobile capabilities, announcing in mid-March that its cloud-based mobility technology was compliant with requirements laid out in the Federal Risk and Authorization Management Program, which (among other things) lays out how government employees remotely connect to government computer networks. Government divisions and agencies represent a huge opportunity.

Given all of those successes, the advent of an HP-branded 3D printer certainly won’t hurt HPQ stock.

Some have been critical of how long it took the company to make the decision to get into the 3D printing game, but it appears to be a smart strategic decision. After observing what’s good and bad about current printer choices, HP has made it clear it’s aiming at the higher-end, enterprise-level 3D printer market first and foremost.

It’s a distinct difference from the buzz that drove 3D printing stocks like Stratasys (SSYS) and 3D Systems (DDD) sharply higher last year. Those names were market darlings primarily because they were associated with low-cost 3D printers that the average consumer could begin to afford.

HPQ, however, recognizes that it can win market share and generate higher margins in the enterprise-level 3D printer market by leveraging its know-how to solve two key problems with current 3D printing technologies. Those challenges are the questionable durability of the printed goods, and the lengthy amount of time required to print even the simplest of objects. (Whitman has compared the speed of most 3D printers to the speed at which ice melts.)

If Hewlett-Packard can come up with a 3D printer that’s truly faster and produces higher quality results — which is entirely possible — the company may soon dominate that market, too … a market expected to be worth $11 billion by 2021.

Bottom Line for HPQ Stock

As much progress has been made since 2012, HPQ is still closer to the beginning of its turnaround than the end of it. Better yet, the size of the opportunity the new-and-improved Hewlett-Packard has waiting in front of it seems to be expanding rather than contracting as time goes on, particularly now that IBM is out of the way in the server market, and HPQ has a product that it can market to government divisions. The 3D printing opportunity is just a little gravy.

Most compelling of all, however, is that even with the 36% runup over the past twelve months, the price of HPQ stock relative to its current and projected earnings is still quite minimal.

For perspective, HPQ stock is trading at 11.5 times its trailing twelve-month income, and only 8.2 times fiscal 2015’s estimated profit. And, considering Hewlett-Packard has topped estimates in twelve of its last thirteen quarters, odds are pretty good that low forward-looking P/E ratio really is as juicy as it looks for HPQ stock.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC