Weekly Review: Microsoft, IBM, HP And Adobe
The broader stock market rallied during the week posting sixth consecutive weekly gain. Companies in the enterprise technology services space, e.g., International Business Machine (NYSE:IBM) and Microsoft Corporation (NASDAQ:MSFT), underperformed the market, while product company Adobe and hardware manufacturer Hewlett-Packard Company(NYSE:HPQ) outperformed. In this note, we discuss some of the key events from the past week for these companies.
HP
During the week, Hewlett-Packard declared its results. Even though the topline failed to report growth, the stock rallied due to an improvement in margins. ((Read about it here)) Our valuation of $31.33 (market cap of $58.5 billion) for the company is 20% below the current market price of $39.17 (market cap of $73.1 billion). We expect HP to report revenue of around $115 billion and net income of $6.1 billion for calendar year 2014. We forecast non-GAAP diluted EPS of $3.2, which is below the market consensus of $3.6 (Reuters).
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Microsoft Corporation
Microsoft’s stock had a lackluster performance in the week. However, it intensified its efforts to gain a foothold in the rapidly transforming and growing mobile devices industry in the emerging markets with launch of Lumina 535, which is price at $150. We have a $44.46 price estimate for Microsft, which translates to a market cap of around $366 billion. Our price estimate represents a 8% discount to the current market price. We estimate the company’s calender Year 2014 EPS at around $2.72 (fiscal years ending in June), compared to a consensus estimate of around $2.69 according to Reuters.
IBM
IBM’s stock traded in a narrow range of $160-$161 during the week, deifying with the rally in broader market. However, during the week, IBM unveiled its platform for B2B clients to improve customer engagement. Furthermore, it expended its mobile services portfolio to include mobile application and infrastructure analytics and application virtualisation for mobile platforms. [1] Our valuation of $227 (market cap of$225 billion) for the company is 40% above the current market price of $162 (market cap of $160 billion). We expect IBM to report revenue of around $101 billion and net income of $16.87 billion for 2014. We forecast non-GAAP diluted EPS of $16.75, which is below the market consensus of $18.41 (Reuters).
Adobe
Adobe’s stock continues to defy the broader markets as it rallied at a faster pace compared to the indices. For the week ended 28th November, the stock traded in the $70-$72 range. During the week, the company rolled new mobile capabilities for its existing portfolio of marketing solutions. Currently, our valuation of $57.79 (market cap of $28.8 billion) for the company is 20% below the current market price of $72.98 (market cap of $36.4 billion). We expect Adobe to report revenue of around $4.28 billion and net income of $283 million for calendar year 2014. We forecast non-GAAP diluted EPS of $1.25, which is inline with the market consensus of $1.26 (Reuters).
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