As it did with DELL, FBR is cutting its estimates on Hewlett-Packard (HPQ) in the face of weak data out of Taiwan:
Based on continuing downward revisions to the 2H08 notebook PC build forecast, we are modestly trimming our HPQ revenue and EPS estimates for 4Q08 and FY09.
Ultimately, FBR believes the current issues are cyclical, not secular or competitive:
We do not believe that the current notebook build forecast changes the longer-term thesis that HP remains very well positioned to benefit from the secular market trends in PCs, and that there is a potential market shift toward more inkjet-based corporate/industrial printing. Therefore, while we expect some near-term choppiness as traders react to fluid 2H08 PC build forecasts, we think investors should consider using the choppiness to accumulate shares and/or lower their basis.
FBR is forecasting a 50% return for HPQ and still thinks its estimates are conservative. Assuming the notebook forecasts are a result of the macro economic weakness, we (at Clusterstock) think it is unlikely that this is the case. But in any event:
We believe that our estimates for HP’s business units are conservative, not just for PCs, but also for printing, servers, software, and storage.
FBR reiterates OUTPERFORM on Hewlett-Packard (HPQ), target price $60.