Citi: Hewlett-Packard is 'Oversold,' Here's the Key to Recovery

Analysts at Citi said that Hewlett-Packard Company HPQ stock is "oversold," pointing to the fact that the company's market capitalization has fallen $10 billion "on the news that FCF will be negatively impacted" by $3 billion in separation costs. This, the analysts argued, is a classic case of a sell-off based on increased uncertainty.

In the near term, Citi does not expect impressive quarterly results from HP, though it says that low revenues are "already largely expected" and "should not be a significant driver of near-term performance."

The key, therefore, is when management "finally" addresses and quantifies the "additional dis-synergy costs of operating as two separate companies," according to Citi. "The ambiguity over the size of these new dis-synergy costs has been a key factor behind HPQ's underperformance during the past few months," the note said.

Other key items from next week's HP earnings report, according to Citi: updates on margin recovery and any new service bookings in the pipeline, as well as updates on the spin-off of the PC and printing business. These could all be significant drivers of the stock higher, Citi said.

Citi has a Buy rating and a $41 price target on HP, which reflects a potential return of 24.6 percent, including dividends. This year, Hewlett-Packard stock has declined 16.5 percent, compared with a 2.6 percent increase in the S&P 500 and a more than 5 percent increase in the Nasdaq. Since the start of 2014, however, HP is up nearly 19 percent.