HP Should Stave Off Printing Declines With Modest PC Growth, but Doesn’t Earn a Moat

HP is a legacy technology Titan with poor competitive positioning in our view, but we like its shareholder returns. HP's core markets of PCs and printing offer low growth, slim profitability, and, in our view, don’t have much potential to aid HP in warranting an economic moat. We don’t anticipate HP improving its midcycle growth potential or margin profile, but we do expect it to continue generating heady cash flow and sending nearly all of it back to shareholders between its dividend and repurchase program. Investors able to look past HP’s low growth may find the company’s distributions enticing.