Hewlett-Packard Co (HPQ)

Billy Kawasaki’s Insights - Billy's most-liked answers from 5i Research

HPQ appears deeply undervalued, but it is increasingly showing signs of becoming a value trap. Growth prospects are limited, and leverage is somewhat higher than they would prefer. The company is also facing margin pressure from rising input costs, including memory. While the dividend remains well covered with a payout ratio of just 33%, the combination of weak growth and negative share price momentum keeps them cautious on the stock. Unlock Premium - Try 5i Free

Not flashy. Iconic brand, huge market share. Trades at less than 7x forward PE. Maybe the business doesn't grow a lot, and maybe there isn't a huge upgrade cycle. But if it can increase margins by only 1%, could add $500M-$1B to bottom line. 

Bought back almost half stock in last 10 years; if they do that again, EPS will more than double. Pay-while-you-wait. Lots of upside and margin of safety. Yield is 6.21%.

It reports Tuesday. HP is hostage to commodity prices and won't make their targets

He doesn't like the PC business, and 3D printing won't move the needle for them.

The AI PC has disappointed--he expected it to mean more and doesn't expect it to. There are better stocks out there, despite a low 9x PE and 3.64% dividend. Shares are -8% the past month. Nothing will move the needle here.

They surprised people with that offering, but shares are cheap now at $17.

They lead the coming new cycle in PCS, driven by AI. HP unveiled its line of AI PCs 3 weeks ago, then reported a great quarter. Shares are up 20% in the past month.

Yesterday, they reported a fantastic quarter, making it clear that the build-out of data centres is not done and in fact are in the early innings of AI.

HP jumped 30% in May after unveiling a new line of AI PCs--and there's a PC refresh cycle coming fueled by AI. HP could be the first. Also, HP delivered an earnings beat last week.

It's not Dell. But they have the new AI PC. Should do well next quarter, not this one.

Pivoting into the networking space. Buying Juniper Networks. Own it here, south of $28, and just below $27.

They just reported, up 15% this year so far. But the quarter was mixed though mostly beat expectations: sales were a tad light, earnings beat though, excellent cash flow, good operating margin and raised their full-year forecast.