2 tech stocks explain this market

Investors see value in Hewlett-Packard and growth in ChannelAdvisor.

By Jim Cramer May 24, 2013 9:10AM

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Money and computer (© Angel Muniz/Jupiterimages)ChannelAdvisor (ECOM) and Hewlett-Packard (HPQ), the two standout names today, represent polar opposites, and yet both were up big Thursday, a phenomenon that explains a lot of this market's innate strength.


Most market participants thought that Hewlett-Packard would be a disaster, given the rapid secular decline of the personal computer and the hideous results of competitor Dell (DELL). Instead, we got the opposite, a totally solid positive-cash-flow quarter that showed a dramatic improvement in the balance sheet and a nice bump in the dividend.


None of this was expected. Consequently, Hewlett has rallied significantly, something that makes a ton of sense, because the issue of the company's viability, which was in question not that long ago, has been taken off the table entirely. CEO Meg Whitman has reined in expenses, improved supply-chain management and billing and is doing much more with far less.


All that said, though, the revenue for just about every single line item was horrendous, particularly personal computers, which were down 20%. I like the lineup of new personal computers, which includes new form factors with Android operating systems and ARM Holdings (ARMH) chips. Still, as David Faber stated this morning, there's no doubt that the personal computer market could be shrinking right before our eyes, with no conceivable turn in sight.


In short, Hewlett-Packard, a once-great growth company, is now a cash cow without the kind of sales boom that the market ultimately wants. Hewlett is a quintessential value play, and if we don't get world economic growth, it will be the quintessential value trap. We will look back and say it was down 44% in 2012 because it looked like the company was doomed but bounced back 40% for the year so far because it's not going out of business. Of course, a stock that plummets 44% and then rallies 40% is far from back to even, but it's still something worth writing home about.

ChannelAdvisor is the exact opposite of Hewlett-Packard. Here's a brand-new company, just came public, and it roared to an immediate premium. Unlike Hewlett-Packard, this company is losing money, and it states right in its offering document that it expects "our operating expenses to increase significantly in the foreseeable future which may make it more difficult to achieve profitability."


So why was it loved? Why did it go to a premium immediately? Because ChannelAdvisor has growth, specifically accelerating revenue growth, as it offers solutions to 27% of the top Internet retailers that help them get the most out of their ads on Google (GOOG), Groupon (GRPN), Yahoo (YHOO), Bing, eBay (EBAY) and Amazon.com (AMZN).


You want to see ChannelAdvisor's handiwork? Go to eBay's men's clothing section, as you might want to do for Father's Day. Then go to men's suits. Notice that Jos. A. Banks (JOSB) ad to the right, the one that's offering suits for as low as $99? That's ChannelAdvisor's client, which pays ChannelAdvisor a subscription fee to manage the ad and a revenue share if the sales perform above expectations.


It's a growth business. In fact, it is such a growth business that unlike Hewlett-Packard, which is returning its money to shareholders, it's seeking as much money as possible to be able to build up its sales force and build out its infrastructure to take advantage of the moment, as it is the dominant cloud play for retail sales.


Now I hope you recognize how a money-loser like ChannelAdvisor can roar on the same day as a moneymaker like Hewlett-Packard. It's all about growth and value, both of which satisfy the needs of today's bipolar investment styles.

 

Cramer

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long EBAY.

 

 

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43Comments
May 24, 2013 10:54AM
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In a nutshell, the real reason why the death of the PC is imminent,
is OBAMA.  He has been fighting to take us back to the days of the
abacus ever since he was first elected.

Seriously,  for many reasons listed I prefer my old Model T HP
with an actual keyboard and bigger screens, thank you very much.

And not to change the subject, like dlh, but I just wanted to wish
the board members a very peaceful weekend, and remind us all
to remember those who cannot be in the parades to follow;

Be grateful that the saying "All gave some, and some gave all"
did not have to apply profoundly to those still left to do battle
only with words on computers and posts from the electronic
ether.

Bless you Vets and Thank you.

Placid Memorial Day, all.

May 24, 2013 9:38AM
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Interesting and enlightening article.  I'm not familiar at all with ChannelAdvisor, but based on this article, it sounds like they would have fit in nicely during the tech bubble of the 90s - a company that isn't actually profitable but who's IPO goes up like a rocket based on future growth projections.  Thanks, but no thanks.

I tend to agree that the PC is on it's way out for some folks.  But, there will always be a demand for PCs from those who actually use them to do work.  Try working with a spreadsheet that has hundreds of columns and rows on a tablet or a phone - it doesn't work.  Hell, I have a hard time doing it on a laptop.  I travel with a laptop and always bring along a regular mouse and full-sized keyboard.  If I'm stuck working with a laptop keyboard and mousepad, it takes me twice as long to get stuff done - my fingers are too big and the keys are too small, plus there's no separate numeric keypad.

May 24, 2013 9:51AM
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Agree with Brutus on PC's
Still a long way to go before these devices can match the processing power and the ability to do your work.  Something about the entire interface of touch screen that just doesn't work for many.  The younger generation may not have that problem..... to bad none of them have jobs so a moot point LOL.
May 24, 2013 10:18AM
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I agree wholeheartly with everything or comments about the here/now and even the future of the PC.

 

And the two main reasons that the kids don't have to deal with yet...

 

OFE....(old fkrs eyes)

FAF.....(fat arthritic fingers)

I'm running this on a 22" monitor at 150% zoom.

May 24, 2013 9:54AM
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V_L
Perhaps companies are sensing that we are seeing an end to the low rates in the not so distant future and are ordering things sort of last minute to take advantage of them?
May 24, 2013 10:13AM
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Still, as David Faber stated this morning, there's no doubt that the personal computer market could be shrinking right before our eyes, with no conceivable turn in sight.

 

Well, maybe desktop and classic notebooks but take a look at Lenovo which already restructured their products to include PC's like the Yoga 11s, Z400/500 and S310/410 and the K900 smart phone with Intel Inside. Lenovo's now the #2 PC, yes smart phones and tablets are PC's, in the world and the #2 smart phone vendor in China behind Samsung,

 

Oh, Lenovo's up 4% each of the last two days on  their way to 21-22.

May 24, 2013 10:40AM
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Are companies being run more efficently because of technology or are they being run into the ground?   To what extent is training being enhanced in a more efficiently run business of today?  Are more efficient business managers chopping the "goodness" folks get from their jobs?  My question in regards the models prospering now in America are they long long term success or short term slash and burn models?  I don't believe any new real technology or overwhelming innovations are at work in either of these companies, yet Jim describes them as indicators of the greater picture of what is contributing to the growth in this market.  What exactly does that mean? I think the advancement of efficiency with these three "d" printers is more exciting for future profits than a more efficiently run PC maker or an Ad sales model. But lets face it, some business platforms are repetitive and boring for some, but the cats meow for another.  Whatever your pleasure.  And as long as folks have opportunities to have gainfull work we should all share in supporting their success.

May 24, 2013 11:28AM
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Yes LOM...Thanks for the thoughts...

You that have ever been a Veteran.....Salute the Flag when it is carried by.

You that never had a chance....At least stand up,(if you can) to show respect.

Myself and mine would appreciate you doing that.

May 24, 2013 12:18PM
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ABS NAZI BIGOT RACIST....don't you ever ever get tired....your same old crap day after day after day...and you know what...none of your bull crap will ever amount to ANYTHING.....The President isn't going anywhere until 2016.

 

BUT I NEED TO KNOW.....Have you done any reading lately.....YOU KNOW.....THAT BOOK...that book I was talking about last summer....C'MON  YOU KNOW....YOU REMEMBER....You Know...THAT BOOK....now what was it called again....YES....The Title Of The Book ...IS.....THE 13 KEYS....YOU REMEMBER , ABS NAZI BIGOT RACIST..... THE BOOK THAT PREDICTED THE PRESIDENT WAS GOING TO BE REELECTED TWO YEARS BEFORE THE ELECTION....and you know what else ABS NAZI BIGOT RACIST.....IT'S PREDICTING HILARY IN 2016 AND 2020!!!

 

ABS NAZI BIGOT RACIST....get ready, you're going to die with a Democrat in the White House...HAHAHAHAHAHAHAHA

May 24, 2013 12:43PM
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On the "Lighter Side"...Let's review the week(before I go)...We had more fun..

Cardiologist appt....Got a clean good to go...See ya in a year...About 15 years out...Still alive.

Went bought more tater seed.

Stopped VFW, had a few too many, in the City. Wife pissed because..

Had to go to kids for dinner and see off G-kids and GG-kids off leaving to transfer for job; South.

Next day, watch it rain and fend off un-truisms on blog site, some financial research. Naps.

Next day, get to plant few more taters,research and watching markets, blogging and naps.

Thursday...Pissed about Markets, Go to Club, can't play Golf, rainy...Eat sandwich,have a beer and play 8 ball with Old Guys...Hunt Mushrooms find two...Go to Casino win money..No naps.

Now is Friday...Watching Markets, name callings on blog and some good discussion points.

Gonna hunt 'shrooms one last time, plant last of taters, and take a nap or watch movie..both.

Some days it's fun to be retired, but too busy.

Ya'll have a nice weekend, enjoy the Race and the Holiday WE.....Ciao.

May 24, 2013 11:29AM
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Hah - my 1 eared mutt is out early this morning .....he seems to be using a lot of my lines with the exception of adding the word "black" ......I guess noone really thinks monica the mutt is a deep thinker ...his rants all seem to have the same basic 4 lines of crap ......

So one another note I just wanted to congratulate 6 deferrments ......DICK cheney and halliburton for managing to make 39 Billion dollars of the Iraq war ........I guess we all know now why the shoved all those mossad/m16/cia lies down our throats.....

And of course a special thanks to the media who sat around with their thumbs up their asses !!
May 24, 2013 10:38AM
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I see that for the most part, we all agree on the use of the PC/Notebook as compared to tablets/etc. Those new products are a poor substitute at best. If anything, they are merely an extension of the PC/Notebook, not a replacement. The demise of the PC/Notebook is greatly over exaggerated. Wait until to all those young eyes become Old Eyes.

Considering how much HP charges for ink and their slave labor costs overseas, how can they fail so badly? Like others, not familiar at all with ChannelAdvisors. Weary of new pump and dump bubble stocks.

Buyers have being chasing anything with a tail that moves. They are now in Record territory concerning Buying Stocks on Margin to do so. April sets a record,  over $384 Billion. The last two bear Markets occurred when Buying on Margin set records. Any bets to if this will be any different?

May 24, 2013 10:33AM
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The PC business has been consolidating for years...They that Market best or have user friendliest products seem to be winning the game...

Wasn't only 2-3 Decades ago we had dozens or maybe just a dozen of Manufactures?..Today..?

 

In the Tablet or Phone handheld's World of today, you have essentially the same type of line-up.

May 24, 2013 10:06AM
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I would agree that ChanAd....Is nothing but a Marketeer to the Marketeers....

Another out of House or similar Off shore Solution Group...?

Maybe the way of what has been going on, and what will..?

Why have a full-time dept. of people to shuffle things around or devise ideas..,

When you can contract outside or use when needed?

And the Core Company is left to do what they do best, in an expedient process.

It seem's that it is about cost savings at some level and adding to revenues.?

Never heard of (ECOM) either until today..

May 24, 2013 10:07PM
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Sorry Crazy,

Don't seem to be Freeriding Liberal Commies...That"are" the biggest takers or non-givers to America.

 

According to newest study or poll...."Actually" who the CHECKS are written to..

Surprise,surprise it's the Obese, or Fat-azz Conservatives, Lazy, Republicans in the RED STATES.

No wonder they are scared, hate or are racist against Obama, they are afraid their "free benefits" will be cut off...They are just user's of the system..

If the "hardworking liberal Democrats" ever stop working, these "freeloaders" will starve to death.

 

May 24, 2013 4:06PM
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What a day...,One word: resiliency; wild week, we could have ended in the pits but the good guys came through...Not a great week by any means but it could have been a lot worse....Manipulators are waking up again unfortunately, we will have to be careful next week, a short week....Monday is a day of remembrance, to all our brothers and sisters that gave it all for our great nation...My 26 years in the US Army were the best ones of my life...Have a great weekend all and please remember our heroes before the bbqs or whatever events you have planned for Monday. God Bless the USA.
May 24, 2013 11:36AM
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I was going to save this for 2014 but I am sure there will be more by then:

TeaParty Congress hard at work:

Veterans Jobs Bill - Blocked
Wall Street Reform - Blocked
Immigration Reform - Blocked
Political Ad disclosure - Blocked twice
Small Business Jobs act - Blocked twice
Unemployment extension Bill - Blocked twice
Affordable Care Act - Tried to block 33 times !!!! (that ones funny) !!!
Tax on COmpanies shipping Jobs overseas - Blocked
Healthcare for 9/11 first responders - Blocked
Benefits for Homeless Veterans - Blocked
Fare Pay Act 2009 - Blocked
Oil spill liability acts - Blocked

Much like monica - tea party supporters will swallow anything their billionaire founders tell them !!

May 24, 2013 11:30AM
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Hey Uncle Jimmy ....your litte nephew monica is here to defend you today .....woohoo ...I guess he has forgiven you for making him cup your balls (and vice versa) all though high school !!

: )
May 24, 2013 1:15PM
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One wonders when monica first became a racist ...was it perhaps when he came home and found a loved one being spit roasted by a couple of falashas? If so most likely jealousy as he wanted to be the pig in the middle ....but all that fat !!! .....

Perhaps his fascination with Tea Parties started at  an early age while playing "tea party" with his dolls and fantasizing about all his imaginary "friends" and how he is the "boss" and everyone likes him.....

Later in high school after some locker room teasing (perhaps by people of color)  --- he would run home crying to mommy "why do the boys call me PeeWee Halfman and the girls call me Justin Barely ...." ...... "don't worry son size doesn't matter ....look at your dad ..." ...."you may want to try and drop a few pounds though ....if you get down to 300 they may let you be the towel boy again never mind those nasty rumors about u being a pee pee peeker ....mommy believes you ....not those 83 liars in your class..."
May 24, 2013 12:01PM
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One quick question before I go and make a last final tour looking for Mushrooms..Seasons over.

 

"New word" cropping up in "financial speak" looks like Twitterease or kind of stupid to me, because it's used in different types of context...

The word or abbreviate is "COMPS"....But it is used in various ways that don't make sense sometimes, except to maybe someone that is 25, working on Wall St.?

 

Maybe it means "comparables" but isn't always used correctly, at least not from my viewpoint.

Off to the Woods...

BTW....Last night came home with about an extra $125 from Casino, and another Tom Collins glass(building a set of 12) free gratis.  Miss Lilly dropped about $30..

We both had comp or free play of about $50 bucks each..

Dropped a little on slots, even w/free play..( I don't like slots that much) She won.

Made $25 on Roulette, betting only red....She lost on black...I didn't play Black 17. Like 35 too.

Mississippi Stud Poker...Made some bucks there.

BlackJack(21) added a small amount to the booty.

And stayed about even on 3-Card Poker...

Diversified last night and play everything....An enjoyable night for me.

Cheese ya later....

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