Company Reports

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.

We lower our fair value estimate for no-moat HP to $27 from $30 per share as we cut our short-term revenue estimates. HP’s end demand still looks soft, and we no longer model a significant recovery in fiscal 2024. PC sales continue to look challenged after the pandemic-driven demand surge of 2021, and we believe printing still looks like a market in secular decline. We expect HP to return to stable, low growth after fiscal 2024, but we no longer model a more meaningful recovery from these levels. HP’s profitability and cash flow have been positive of late, but we expect these to revert to lower levels in the longer term. We see shares as fairly valued.

We maintain our $30 fair value estimate for shares of no-moat HP after it reported decent fiscal fourth-quarter results. HP’s fiscal 2023 was afflicted by weak demand across both PCs and printing in what we see as a correction from immense pandemic-era demand in 2021. We’re encouraged to see sequential improvement to end the fiscal year, and expect a continuing recovery through fiscal 2024. In our view, rebounding PC demand should drive growth in fiscal 2024 and beyond, as we believe printing sales will continue a slow perpetual decline. We see shares as modestly undervalued after a 3% selloff on tepid guidance for the January quarter.

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.

We maintain our $30 fair value estimate for shares of no-moat HP after its 2023 analyst day reiterated existing strategy and its long-term financial model largely fit our expectations. HP’s presentations centered around a focus on profitability across flat PC and printing end markets. The firm also highlighted its growing mix of growth-adjacent markets like peripherals. We continue to like HP’s focus on profitability, cash flow, and shareholder returns, and we think investors do too, with shares up 2% afterhours following the analyst day. We see shares as modestly undervalued, with very attractive shareholder returns.

We maintain our $30 fair value estimate for no-moat HP after it reported fiscal third-quarter results that exceeded the high end of its guidance range. Management provided fiscal fourth-quarter guidance that was below our previous expectations as the difficult macroenvironment has persisted longer than anticipated, resulting in a more moderate outlook for HP’s fiscal 2023 earnings. The turning point that HP expected has yet to be realized and cost discipline actions remain in place. We reiterate our view that markets will rebound in the medium term but still view HP’s offerings as lacking a long-term moat and we view shares as fairly valued.

We maintain our $30 fair value estimate for no-moat HP shares after the firm reported fiscal second-quarter results at the high end of its guidance range. Management narrowed its fiscal 2023 non-GAAP EPS outlook range, as the firm gains greater visibility into the second half of the year. While macroeconomic headwinds remain steadfast, the firm believes it is at a turning point and expects reduced channel inventory, favorable seasonality, and cost discipline to bolster second-half results. While cyclical dynamics affecting HP are transitory in nature, we do not view HP’s commodity-like offerings as moaty for the long term. We see shares as fairly valued.

We maintain our $30 fair value estimate for no-moat HP shares after the firm reported fiscal first-quarter results in line with guidance and reaffirmed its fiscal-year guidance. HP is dealing with soft demand across both personal devices and printing which is slowing sales. Additionally, it is taking the firm’s distributors a few quarters to work through their inventory, which further slows new orders for HP. We see these cyclical dynamics as short-term in nature, but par for the course for a company like HP that plays in commoditylike markets that lack moats in our view. We see shares as fairly valued.

We maintain our $30 fair value estimate for no-moat HP after it reported its fiscal 2022 fourth-quarter results. We saw few surprises in the print, but HP’s guidance for weak demand in fiscal 2023 and announcement of a large restructuring program were more noteworthy. HP’s poor forward-looking macroeconomic commentary matched PC rival Dell’s earlier this week, and the firm is not expecting demand to rebound in the short term. HP’s restructuring program didn’t come as a surprise to us, but is notable for its ambition to save $1.4 billion in annualized costs and reduce headcount by roughly 10%. While we expect HP to improve its profitability with these savings, it doesn’t alter our expectations for the firm to be vulnerable to cycles in its commoditylike markets that can create volatile earnings and inform our no-moat rating. We see shares as fairly valued.

We are modestly raising our fair value estimate for HP to $30 per share, from $29 previously, after revising our long-term forecasts. We maintain our no moat and negative moat trend ratings, along with our High Morningstar Uncertainty Rating and Standard Morningstar Capital Allocation Rating. With shares trading around $28, we recommend a greater margin of safety to investors, but we view HP’s shareholder returns as an attractive attribute at a better valuation.

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.

We are maintaining our $29 fair value estimate for no-moat HP after its second-quarter results came in better than we anticipated for revenue growth and earnings. We view shares, which were flat after the print, as overvalued. Although HP is strongly benefitting from record demand for PCs due to widespread remote working and schooling as well as computer refreshes as offices reopen, we believe this record demand will start to cool as PC manufacturers work through backlog. In turn, we remain cautious about HP having durable demand drivers due to skepticism regarding PCs entering a new era of lasting demand.

No-moat HP Inc.'s shares soared higher than 15% after Berkshire Hathaway disclosed it owns about 121 million HP shares, or about 11% of HP. Berkshire poses a stout record of investing in firms it views as having long-term appreciation potential, and we think HP fits the bill for being a value play within the technology sector. However, we remain cautious about demand reverting and normalizing as HP has been an outsized beneficiary of record PC demand stemming from remote working and schooling. In turn, we maintain our $29 fair value estimate and see shares as overvalued.

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.

No-moat HP reported impressive first-quarter fiscal results, with top- and bottom-line figures above our expectations, led by continued strength in the personal systems vertical. The continued supply-demand imbalance within the market predominantly impacted the HP print segment over the first quarter, resulting in uncaptured revenue from supply chain constraints paired with a growing backlog of demand for products. We are maintaining our fair value estimate of $29 per share, as we expect growth within fiscal 2022; however, we remain cautious of long-term demand for current supply-constrained products after near-term market imbalances normalize. Shares fell about 2% after hours and we still view shares as overvalued.

No-moat HP Inc closed off fiscal 2021 with impressive financial results, with top- and bottom-line numbers above our estimates as continued strength in the personal systems vertical buoyed the firm's top line. As in the quarters before, management highlighted the supply-demand imbalance currently present in the market, with HP's revenue being limited by supply chain constraints despite having willing buyers for their products. We are raising our fair value estimate to $29 per share from $27 as we expect growth to continue in fiscal 2022; however, we see shares as slightly overvalued as we remain concerned about the long-term demand for supply-constrained products after supply chain challenges normalize.

We are raising our fair value estimate for no-moat HP Inc. to $27 from $25 after its 2021 analyst day provided fiscal 2022 earnings and free cash flow guidance that was higher than we expected. HP also confirmed its previously stated fiscal fourth-quarter guidance. However, we remain skeptical about the longer-term enthusiasm HP has regarding the computer and printing markets being sustainable growth areas that can provide increased operating margin dollars. While we positively view particular innovative, higher margin and growth areas like personal systems peripherals, graphics, and printing packaging, our anticipation is the surge in demand for core PC and printing solutions will begin to lull as HP works through the backlog brought on by the pandemic and supply chain constraints. In turn, we see shares as modestly overvalued.

No-moat HP Inc finished off its third quarter with top- and bottom-line numbers comfortably above our estimates as a resurgence in the printing segment buoyed the firm's top line forward. As enterprises gradually implement return-to-office plans across the globe, we expect an uptick in commercial print revenue for HP--an area particularly affected by the COVID-19 pandemic. Once again, management highlighted the supply-demand imbalance currently present in the market, with HP's revenue being limited by supply chain constraints despite having willing buyers for their products. Despite the supply chain concerns, we raise our fair value estimate to $25 per share from $23 per share, as we expect them to abate over the next year. With shares down 4% to $28 per share, we think HP is currently fairly valued.

No-moat HP reported top- and bottom-line numbers above our estimates as the company's notebook and printing segments demonstrated strength. We were particularly impressed by the rejuvenated supplies and commercial print hardware segments, which were buoyed by improving enterprise demand. Management pointed out a supply-demand imbalance due to industry-wide component shortages and a resurgence of COVID-19 in Asia led to the firm not being able to fulfill its broad-based demand. We are maintaining our fair value estimate of $23 per share. Shares fell more than 6% after hours and we recommend investors wait for a wider margin of safety.

We expect HP to remain a leader in the personal computer and printing markets; however, these markets are facing challenging long-term growth prospects, in our view. Industry shifts toward using mobile devices as computer supplements or replacements and fewer printing tasks being performed for economic and environmental reasons may create headwinds for HP. We believe that HP's growth initiatives will expand its market share within the PC and printing industries as consolidation occurs, but we expect cost competitiveness among the remaining vendors to limit potential upside.