Today: Hewlett-Packard (HPQ) and Tesla hit new highs as Silicon Valley outperforms Wall Street.

The lead: Hewlett-Packard shoots higher, but analysts mixed on future

Hewlett-Packard shot to a 52-week high Thursday, as investors reacting to the Palo Alto tech giant's ability to beat analyst's diminished earnings expectations pushed the company's stock to its second-best one-day gain in the past 45 years. Despite the beat on first-quarter earnings, analysts are still split on the company, which CEO Meg Whitman says is still early in a five-year turnaround program.

In this Aug. 21, 2012 photo, the Hewlett-Packard Co. logo is seen outside the company’s headquarters in Palo Alto, Calif. (AP Photo/Paul Sakuma)
In this Aug. 21, 2012 photo, the Hewlett-Packard Co. logo is seen outside the company's headquarters in Palo Alto, Calif. (AP Photo/Paul Sakuma) (Paul Sakuma)

HP shares rose as high as $24.95 Thursday before closing with a 17.1 percent gain at $24.86, both highs easily eclipsing the company's previous intraday high from the past year of $24.05. The rise arrived on the heels of HP's earnings report, which showed the company posted profits that topped $1 billion, or 55 cents a share, on revenues of $27.6 billion; analysts had expected profits of 44 cents a share, and they were impressed with the performance -- in the short term.

"Meg Whitman, in our view, has made impressive strides in righting the business and rekindling some product innovation," Wells Fargo analysts wrote in a note. "However, we think the real test will be in driving growth, which could prove challenging."


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While reactions to the HP report were varied, a theme began to take form: Good for them for doing so well this quarter, but those results are unlikely to last.

"HP gives investors a 'sugar high,' but not a sustainable trend," Topeka Capital Markets analyst Brian White wrote, later adding, "We believe this performance speaks more to low expectations."

Deutsche Bank analysts said that HP has been focusing on getting that profits number higher, which it called "shrinking your way to profitability," which it termed "not a successful (long term) strategy."

Whitman visited CNBC and was asked about that specific accusation.

"We are investing a lot in our business," she said. "We are not mortgaging the future."

Whitman continued to say that she has started pushing the gigantic yacht that is HP into a long-term turnaround, and the boat has a long way to go to find smooth sailing.

"We are embarked on a five-year turnaround journey, we're about 18 months into that journey, and I think we're right where we thought we would be, in fact probably a little ahead of schedule," she said Thursday.

Investors jumping into HP stock now can fight analysts' suggestions that the company is only posting large profits through short-term thinking can point out that even with Thursday's rise, the stock is trading far below its average price-to-earnings ratio, which is the second-lowest P/E ratio among profitable S&P 500 companies, according to FactSet.

One can rationally argue both sides of the "Is HP a good investment?" debate, and Whitman gave the reason in the CNBC interview, detailing that the company has divisions that are struggling -- such as personal computers and printers -- but is working to increase its presence in growing sectors like software and services.

"We are growing businesses that power the new style of I.T.; we've got declining businesses that powered the old style of I.T.," she said. "So we're in that knothole that one has to get through."

Silicon Valley market report: Tesla hits new high after repaying government loan

HP's performance helped keep Wall Street afloat Thursday, fighting off fears after the Nikkei index in Japan took a giant tumble. The three major U.S. indexes managed only a slight dip, and Silicon Valley stocks were actually powered to a slight gain by the performance of its second-largest company in terms of revenue.

Wednesday's other big after-the-bell winner from Palo Alto, Tesla, also established a new high and helped the SV150 gain. The electric car maker established a record closing price of $92.73 with a 6.3 percent bump in the wake of the company's full, early repayment of the Department of Energy's $465 million loan. Even as the repayment changed the company's perception in some circles, CEO Elon Musk still had to defend his statement that Tesla was the first U.S. car company to repay its federal loans, as Chrysler tried to claim the title. Musk not only defended his claim, but also went on television to note that the American taxpayers got $20 million in profit from the loan; additionally, SolarCity -- for which Musk serves as chairman and major investor -- gained 5.6 percent to $46.79.

Apple (AAPL) managed a slight gain of 0.2 percent to $442.14, even while facing more criticism of its tax practices following CEO Tim Cook's defense of the company in congressional testimony. Yahoo (YHOO) dropped 2 percent to $26.02 as it continued to shop after the $1.1 billion purchase of Tumblr, picking up a Belmont gaming company dubbed PlayerScale. Google (GOOG) dropped 0.8 percent to $882.79 as it prepares to launch Google Street View in the Galapagos, but could face pressure Friday after Bloomberg News reported late that the FTC is looking into yet another possible antitrust inquiry. After the bell, San Francisco-based Salesforce dropped in late trading following its earnings report.

Up: HP, Tesla, SolarCity, Electronic Arts (ERTS), Nvidia, Advanced Micro Devices, Cisco (CSCO), Workday, Applied Materials, Oracle (ORCL), Intuit (INTU), Yelp, Apple, eBay

Down: Symantec, Yahoo, VMware, NetApp, Netflix (NFLX), Adobe (ADBE), Gilead, Juniper, Google, Facebook, SunPower (SPWRA), LinkedIn, Zynga

The SV150 index of Silicon Valley's largest tech companies: Up 4.39, or 0.35 percent, to 1271.99

The tech-heavy Nasdaq composite index: Down 3.88, or 0.11 percent, to 3,459.42

The blue chip Dow Jones industrial average: Down 12.67, or 0.08 percent, to 15,294.5

And the widely watched Standard & Poor's 500 index: Down 4.84, or 0.29 percent, to 1,650.51

Also in the news: Twitter's ad moves, Lyft's venture investment: Twitter keeps focus on advertising: The San Francisco social-networking company announced a new advertising venture involving television, and Bloomberg News reported it is also working on an offering that will let companies find already-existing customers' Twitter accounts. ... A big lift for Lyft: The San Francisco startup that offers drivers the chance to pick up passengers for cash received $60 million from Andreessen Horowitz. ... Gap's profits shoot higher: The San Francisco clothing company's profits rose more than 40 percent in the first quarter. ... Folders fits in Box: Los Altos-based Box bought Folders to boost its offering for Apple mobile devices. ... Visa faces new lawsuit: Large retailers including Target dropped out of a $7.2 billion settlement to sue Foster City-based Visa as well as MasterCard. ... TaskRabbit wants to be a temp agency: The San Francisco startup is looking to offer its workers to businesses for less than standard temp-agency fees.

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.