Two Tech Stocks Explain This Market

 | May 23, 2013 | 3:31 PM EDT
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ChannelAdvisor (ECOM) and Hewlett-Packard (HPQ), the two standout names today, represent polar opposites, and yet both are up big today, 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 instead of the usual Microsoft (MSFT) software and Intel (INTC) Inside semiconductors. 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 today, 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 (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.

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