Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high.
Hewlett-Packard (HPQ). Hewlett-Packard could have a pretty good year. The only problem for investors may be that the share price is up 100% over the last two years. Running two sub-four minute miles in a row can be very tough. Running three is almost impossible.
It appears that all of the current management is clear of problems from the company’s board spying scandal. Management says that HP is going to have its first $100 billion revenue year. And, as revenue grows, HP plans to continue cost cuts.
But, HP’s growth cannot much outdistance the worldwide growth of PCs, servers, and printers, so 2007 will have to be at least a modestly good period for those tech sectors.
A look at HP’s last 10-Q indicates that some of its large businesses are not growing very quickly. These would include the HP Services operations and Enterprise Storage and Servers. It would certainly be hard for HP’s to hit its growth targets if revenue at those units starts to flatten.
Factors that could help shares move above price target: HP’s share of the PC market has been doing well, especially compared to Dell. If this market share shift accelerates, HP’s revenue could get a boost. If Vista sales are more robust than forecasts, HP’s could get improved unit sales growth.
Factors that could push shares below forecast: HP is hostage to overall global tech growth because of its size. If there is any worldwide drop in tech purchasing, HP almost certainly gets hurt. Competition with IBM, Sun and other companies in the corporate server markets is fierce. Price wars there would not help any of them.
Douglas A McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
Top Gaining Stocks
Top Losing Stocks