HP Acquiring Poly to Capitalize on Peripherals Needed for Hybrid Work; Maintaining $29 FVE

We are maintaining our $29 fair value estimate for no-moat HP Inc. after it announced the intention to acquire communication peripherals company Poly for $40 per share in cash, or about $3.3 billion in enterprise value. HP's shares sank about 5% on the news, which we believe reflects uncertainty in HP being able to significantly accelerate Poly's growth durably and concerns around the planned operating margin expansion of Poly being underwhelming. Although we think this deal helps HP sell a more holistic hybrid working solution on top of its PC and printing products, we continue to see shares overvalued as we expect record PC and peripherals demand to wane as supply chain challenges abate.