Are H-P shares finally cheap enough?

SAN FRANCISCO (MarketWatch) — Hewlett-Packard Co. saw its shares tumble to their lowest valuation in at least ten years on Tuesday, though some analysts are still wondering if the stock is cheap enough — given the company’s current struggles. H-P HPQ -7.79%  shares slumped more than on Tuesday afternoon after the company lowered its earnings and revenue forecasts for its third fiscal quarter and entire fiscal year. Read more about H-P's results.

Those forecasts stem mostly from the company’s on-going struggles with its consumer PC and services businesses, as well as effects from the recent natural disasters in Japan. The news put the stock to its lowest level in nearly two years and pushed the shares below the lowest price targets of 30 industry analysts surveyed by FactSet Research. The stock is now down more than 14% for the year.

“A near-term catalyst is tough to identify, [and] we view the shares as washed out at current levels,” said Citigroup analyst Richard Gardner, in a research note. Gardner has a buy rating and $65-a-share price target on H-P’s stock.

Abhey Lamba of ISI Group downgraded H-P to a hold rating and cut his price target on the shares to $40 on Tuesday following the results. He said the stock “is likely to remain at current levels, despite an attractive valuation.”

Before the market opened, H-P lowered its 2011 earnings forecast to $5 a share. Analysts surveyed by FactSet estimate that H-P will earn $5.64 a share in its 2012 fiscal year.

But even with H-P giving the market little to rally around, and its stock looking depressed, several analysts say the shares, may represent an opportunity for investors who can stomach the challenges the company is currently facing.

Apotheker addressed the services issue on a conference call before the market opened Tuesday, saying H-P has “not yet shifted our services mix to higher-value, higher-margin and higher-growth categories.” Apotheker also said H-P will hire an executive vice president to focus on IT services and report directly to the CEO.

Shaw Wu, of Stern Agee, called H-P’s outlook and comments on the services business the main reason why the stock has sold off, and driven the overall price of the shares down to more attractive levels.

“Even though it [H-P’s stock] had already underperformed over the last few months, investor confidence has clearly been shaken and it will likely take a few quarters for Apotheker and the H-P management team to win it back,” Wu said. “Yes, the stock is inexpensive, but looks like it is getting more so. Though at these depressed prices, it looks interesting even on lower forward estimates.”

Wu has a buy rating on H-P’s stock and cut his target price on Tuesday to $53 a share from $56.

Auriga analyst Kevin Hunt trimmed his price target on H-P to $45 a share from $46 and maintained his hold rating on the stock. Hunt said he doesn’t see any sustainable growth opportunities for H-P’s business right now, and thinks it may take the rest of the year for H-P’s shares to qualify as “cheap.”

“It does look pretty cheap on traditional metrics,” Hunt said. “But H-P can’t be considered a growth company anymore, which is how most of tech is viewed.”

Hunt added that H-P “kind of falls into the value trap bucket now, where a stock is cheap, but cheap for a good reason.”