J.P Morgan Raises Estimates & Adds Hewlett Packard To Its Focus List

J.P Morgan is adding Overweight-rated Hewlett-Packard HPQ to the J.P. Morgan Analyst Focus List with a PT of $57 versus $55 previously. It believes that a series of catalytic events are lining up to restore investor sentiment in the stock in the near term. JPM also believes that the increasing mix shift to the enterprise and a three-stage expansion in gross margins should keep the stock climbing higher longer term. Meanwhile, it sees downside support in the stock as investors have prepared for PCs and printers to exhibit muted growth. The new CEO transition, the mixed acquisition campaign of 2010, increased signals of more enterprise-focused acquisitions forthcoming, and higher OpEx churn all are yesterday's news. While the acquisition overhang stands to persist, J.P Morgan believes that HP gradually will win over investors' confidence as relates to the other factors in the near term. J.P Morgan is raising revenue and operating margin estimates for HP, and it does not expect this iteration to be the last. It is boosting revenue estimates for all segments but personal systems JPM's conversations with industry contacts indicate that the company is not investing beyond any mix-driven goodness on the gross profit front, and it thinks that this dynamic should ease investor concerns that gross margin improvements will not be able to counter incremental OpEx investments. JPM closed at $47.43