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Shares of Hewlett Packard Co or mostly known as HP fell 6 percent after Goldman Sachs downgraded them to "sell," warning that investors may be overestimating the company's chances of a successful turnaround while it grapples with its declining PC and printing business.
HP, in the midst of a restructuring that Chief Executive Meg Whitman has said will take years, is also struggling with intense competition in its servers and storage hardware division, the investment bank said in a research note.
Coupled with the need to re-invest any savings from its current overhaul in research and business development, its earnings may continue to come under pressure this fiscal year and beyond, Goldman said.
Wall Street's "consensus is attributing an unreasonably high probability to the turnaround success and incorrectly assuming fundamentals have already bottomed," it wrote.
"In contrast, we believe EPS expectations could face downward revisions in coming quarters."
HP, the world's largest PC maker, has struggled with a fundamental erosion of demand for computers and printing supplies such as ink cartridges as consumers shift to mobile devices.
