Today: Hewlett-Packard's (HPQ) stock price dives as analysts cut price targets in the wake of the company's biggest quarterly loss ever. Also: Stocks fall across the board and two other Silicon Valley companies fall after earnings reports.
Hewlett-Packard stock plummets after earnings report prompts downgrades
Hewlett-Packard stock was slaughtered Thursday on Wall Street, as analysts downgraded the company in the wake of an earnings report that showed weakening demand for the personal computers as CEO Meg Whitman attempts to refocus the company.
HP stock fell 8.2 percent, nearing lows unseen for seven years, as at least five analysts trimmed their price targets, which name the share price at which an analyst believes investors should sell the stock for maximum return. The moves were in response to the Palo Alto tech giant's Wednesday earnings report, which included the biggest quarterly loss in company history due to a write-down of a poor acquisition. "We are deeply troubled by the events at HP and within the broader PC landscape," Needham
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"We are still in the early stage of the turnaround. There will be challenges ahead that could create some variability in performance. But I'm confident in our ability to work through them and get to where we want to be," she said Wednesday.
The dour conference call was noted by many analysts who downgraded the company Thursday.
"Management made a point to remind investors that HP remains in the 'early stages' of a turnaround, while highlighting an increasingly challenging economic backdrop and growing competitive pressures in the PC market," Topeka Capital analyst Brian White wrote in a note. He drastically reduced his price target on the stock from $23.50 to $17.75, while maintaining a "Hold" rating, adding "We believe the HP turnaround will take time and investors will be dealt head fakes along the way."
Even Shaw Wu, a Sterne Agee analyst who is positive on the stock with a "Buy" rating and $31 price target that did not change Thursday, saw reasons for downgrading the stock.
"Concerns with its quality of earnings given the large amount of restructuring charges and negative tone on its conference call unfortunately overshadow the considerable improvement made in its balance sheet," he wrote Thursday.
HP's stock closed at $17.64 after falling as low as $17.56, near the 52-week low hit earlier this month that constituted the lowest price for HP shares in the past seven years.
Stocks fall across the board as hopes for Federal Reserve action dim
Stocks fell across the board Thursday, as Wednesday's rally on hopes of economic actions by the Federal Reserve faded. The Dow Jones industrial average, which includes HP, had its biggest one-day drop in a month while falling for the fourth consecutive day, and all three of the major U.S. stock indexes lost at least 0.7 percent on the day.
The president of the St. Louis Federal Reserve bank, James Bullard, threw cold water on the hopes of investors who felt optimistic about Fed action after minutes of the central bank's previous meeting said they were prepared to act "fairly soon." Appearing on CNBC, Bullard said that those minutes were out of date, as the U.S. economy has picked up in the past month."You can definitely correlate (the decline) with Bullard's comments this morning trying to temper expectations," Seth Setrakian of First New York Securities told Reuters. "Is this an appropriate move? Why not? We've had a rally on expectations that things are going to happen, not because things are getting better."
Weakness in the tech sector was not limited to PC companies, as Intel (INTC) (down 2.7 percent), VMware (down 4 percent), Intuit (INTU) (down 2.5 percent) and Netflix (NFLX) (down 2.1 percent) were hit with losses as well. Even the most valuable U.S. company, Cupertino-based Apple (AAPL), had a rough day, losing 0.9 percent off its record closing price from Wednesday.
Salesforce, Autodesk fall in late trading following earnings reports
Losses didn't stop with the bell on Thursday, as two Bay Area software companies that released earnings after the market closed saw their share prices damaged in after-hours trading.
San Francisco-based Salesforce issued a third-quarter forecast lower than analysts expected as it deals with beefed-up competition in the cloud-software realm from giants such as Oracle (ORCL) and SAP. "The competitive environment is getting more intense," Global Equities Research analyst Trip Chowdhry said.
The company's stock fell more than 5 percent, but that was a slight blip compared with Autodesk, which fell more than 20 percent in after-hours trading following the San Rafael-based company's disappointing earnings report.
"Our own execution challenges, combined with an uneven global economy, resulted in disappointing revenue results for the quarter" CEO Carl Bass admitted in the company's announcement.
Autodesk, which makes specialized professional software, plans to lay off workers to try to get back on track, though it still reduced its earnings forecast.
Silicon Valley tech stocks
Up: Agilent, LeapFrog, Sunpower, Tesla
Down: Apple, Google (GOOG), Oracle, Intel, Cisco (CSCO), HP, eBay (EBAY), YahooThe tech-heavy Nasdaq composite index: Down 20.27, or 0.66 percent, to 3,053.40.
The blue chip Dow Jones industrial average: Down 115.30, or 0.88 percent, so 13,057.46.
And the widely watched Standard & Poor's 500 index: Down 11.41, or 0.81 percent, to 1,402.08.
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.
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