With shares of Hewlett-Packard (NYSE:HPQ) trading around $19, is HPQ an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Hewlett-Packard is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses and large enterprises, including customers in the Government, health and education sectors. Its operations are organized into seven segments: the Personal Systems Group , Services, the Imaging and Printing Group, Enterprise Servers, Storage and Networking, HP Software, HP Financial Services and Corporate Investments. Hewlett-Packard’s offerings include personal computing and other access devices; multi-vendor customer services, including infrastructure technology and business process outsourcing, application development and support services, and imaging and printing-related products and services. Hewlett-Packard is an established technology name worldwide and when consumer and companies large and small demand technology products, solutions, or software, it is just about the first in line to provide them. As economies around the world continue to develop, Hewlett-Packard is providing the products that fuel and sustain their growth. Through its segments, Hewlett-Packard has the resources and innovation to continue to providing products and technologies to growing businesses across various sectors.
T = Technicals on the Stock Chart are Mixed
Hewlett-Packard stock has been in a long-term decline since early 2010. The stock has recently rebounded off of lows and may be attempting to change the direction of price momentum. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Hewlett-Packard is trading around its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Hewlett-Packard options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Hewlett-Packard Options | 38% | 80% | 78% |
What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| May Options | Average | Average |
| June Options | Average | Average |
As of today, there is an average demand from call and put buyers or sellers, neutral over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion…
E = Earnings Are Decreasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Hewlett-Packard’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Hewlett-Packard look like and more importantly, how did the markets like these numbers?
| 2012 Q4 | 2012 Q3 | 2012 Q2 | 2012 Q1 | |
| Earnings Growth (Y-O-Y) | -13.70% | -3060.95% | -582.80% | -23.81% |
| Revenue Growth (Y-O-Y) | -5.59% | -6.72% | -4.87% | -2.97% |
| Earnings Reaction | 12.28% | -11.95% | -8.12% | 3.27% |
Hewlett-Packard has seen decreasing earnings and revenue figures over the last four quarters. From these figures, the markets have been confused about Hewlett-Packard’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has Hewlett-Packard stock done relative to its peers, Accenture (NYSE:ACN), Dell (NASDAQ:DELL), International Business Machines (NYSE:IBM), and sector?
| Hewlett-Packard | Accenture | Dell | IBM | Sector | |
| Year-to-Date Return | 39.30% | 19.68% | 31.85% | 1.49% | 5.58% |
Hewlett-Packard has been a relative performance leader, year-to-date.
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Hewlett-Packard provides technology products and services to growing businesses in new and old industries worldwide. The stock has suffered in recent years but is now seeing a strong bounce off of lows. Earnings and revenue figures have been shrinking which has sent mixed vibes among investors. Relative to its peers and sector, Hewlett-Packard has led in year-to-date performance. WAIT AND SEE what Hewlett-Packard does this coming quarter.
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