HP Has Investors' Forgiveness..For Now

Barclays Capital analyst Ben Reitzes tempered investors' enthusiasm in a research report, noting the long process of turning HP around. "While we believe any turnaround will be a multi-quarter effort for HP, investors are likely to see this report as a positive first step. That said, in the context of demand deterioration in Europe and secular pressures still in many businesses into 2H12, we still believe it may be too early to make the call for a sustainable turn," Reitzes wrote in his note. He rates HP "equal weight" with a $26 price target.

Sharp revenue declines in HP's Imaging and Printing Group, services, and its Enterprise Servers, Storage and Networking division indicate that Whitman has a long way to go in turning HP around, and competing with the likes of Apple(AAPL) . For now, it seems like the bleeding has stopped, says Sanford Bernstein's Toni Sacconaghi. "Overall, we were encouraged by HP's quarterly results, which did show signs of stabilization and share improvement," Sacconaghi wrote in an investment note. He rates HP "outperform" with a $39 price target.

Better days may be ahead for the once mighty Palo Alto, Calif.-based company.

BMO Capital Markets analyst Keith Bachman believes HP could see better stock performance over the next few quarters compared to "revenue-dependent stories," as the restructuring process will help earnings growth, but not revenue. If HP is able to generate positive revenue growth next year, Bachman says the company's earnings multiple could expand, and shares could hit $30. He rates HP shares "market perform" with a $27 price target.

For now, HP appears to have earned investors' patience as it transitions its business, becomes leaner, and focuses more on higher-margin operations, like cloud, big data analytics, and security. Patience, however, can only last so long before investors start demanding results.

Interested in more on HP? See TheStreet Ratings' report card for this stock.

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--Written by Chris Ciaccia in New York

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