Hewlett-Packard Company (HPQ): Even If Icahn Doesn’t Buy, Should You?

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Microsoft Corporation (NASDAQ:MSFT) is another tech company that has much more of a diverse portfolio than the other PC makers HP and Dell. Microsoft expects revenues to be up 8.5% in FY2013 and 7% in FY2014. Part of what is driving Microsoft is its new release of various products, including Windows 8 and Office Suite. Microsoft calls billionaire Ken Fisher – founder of Fisher Asset Management – one of its biggest investors (check out Ken Fisher’s newest picks).

Apple Inc. (NASDAQ:AAPL) is another “enemy” of HP’s that is taking market share from both computer companies and mobile companies – including Google and its Motorola devices. Apple has been one of the best growth opportunities given its robust product portfolio and should continue to perform well. Its industry high 20%+ long-term expected earnings growth rate puts its valuation at a discount to most of its peers. Despite cries of a “death cross” and other bearish technical indicators, it’s important to note that one major market technician was calling for a return to Apple’s $700 highs. Check out his bullish case for AAPL here; it’s worth a read.

Last but certainly not least, Netflix, Inc. (NASDAQ:NFLX) has taken up much of Carl Icahn’s time and money of late, as the corporate raider established a 10% stake in the video streaming company earlier this fall. Netflix is up around 45% since the end of October, and now trades over 100x earnings. The next layer of growth for Netflix is expected to come via international subscribers, with total subscriptions in this space growing from 26.2 million in 2011 to 34.7 million in 2012. Analysts predict this figure will hit 43.6 million in 2013. We believe that the interim will be costly for Netflix’s expansion, but that Icahn might be pushing for a strategic sale of Netflix to a key partner. Fellow billionaire Eddie Lampert also loves Netflix, having taken a new position during 3Q (check out Lampert’s newest picks).

Although the initiatives and far reach of HP makes it a compelling long-term value play, it does appear to be a bit out of Icahn’s scope and size. While it might not be likely that Icahn is backing HP, we believe that investors can buy in at a relatively reasonable price. HP trades at the cheapest forward P/E (4.1x) compared to Dell (6.2x), Microsoft (8.4x) and Apple (9.3x). Assuming HP can initiate key savings, it very well could trade in line with Dell on a P/E basis given its market share dominance.

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