HP Sees a Downturn in Demand, but Remains Optimistic About Driving Value; Maintain $29 FVE

We are maintaining our $29 fair value estimate for no-moat HP after it reported third-quarter results below our expectations for top line, but met guidance and our at-consensus estimates for earnings. We view shares, which came down 6% after-hours, as fairly valued. In the quarter, we saw a negative inflection point for consumer spending against a backdrop of higher inflation, currency headwinds, and the Russia-Ukraine conflict. Moreover, we believe elevated PC demand levels driven by hybrid working and schooling as well as computer refreshes among offices are beginning to ease, as manufacturers work through the backlog. We remain critical of HP having durable demand drivers due to skepticism regarding PCs entering a new era of lasting demand.