Hewlett-Packard (HPQ) shares took a serious shellacking on Monday, falling $3.40, or 7.4%, to $42.60, after Friday’s shocking resignation of CEO Mark Hurd. Maybe it’s time for the company to do something about it.
Barclays Capital analyst Ben Reitzes asserted in a research note Monday that as a demonstration of the board and interim CEO Cathie Lesjak‘s faith in the company’s future, HPQ ought to buyback a “significant amount of stock” to drive up EPS in fiscal 2011. Such a move, he contends, would “increase investor confidence, help employee morale worldwide and show HP’s EVP’s that its board has confidence in them.”
He thinks the company will generate over $10.4 billion in free cash flow this year, setting the stage to repurchase more than $5 billion in stock in the fiscal fourth quarter if the company so desired. A buyback of that magnitude, he says, could boost profits in fiscal 2011 by more than 25 cents a share.
Meanwhile, Reitzes notes that the stock trades at big discounts to both Dell and IBM. Oh, the shame of it.
The company has a meeting with analysts scheduled for September 28; that should be fun.
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