Company Reports

No-moat HP reported OK fiscal third-quarter earnings, which had similar themes to the previous quarter. The recovery in PC-related revenue continued, while the printing business remained under pressure. As we adjust our forecasts, we are increasing our fair value estimate to $32 from $31, largely driven by slightly higher PC growth assumptions as we give a bit more credit for growth driven by the upcoming PC refresh cycle. We went into earnings viewing the stock as slightly overvalued (roughly 15%), and with shares down roughly 4% after hours (we think largely driven by weaker growth and margins in printing) in combination with our 3% fair value raise, we now view shares as approximately fairly valued.

HP is a legacy technology titan with a strong share in the personal computer and printer markets. The PC and printer markets are consolidated, with the top several players controlling the majority of each market. The printer market is in a slow secular decline while growth in PCs is also minimal, tending to oscillate with overall refresh cycles as equipment ages and technology improves. The covid-19-driven work-from-home trend led to an unusual boost in demand for PCs, which has now receded.

No-moat HP reported decent fiscal second-quarter earnings with a recovery in PC-related revenue becoming more established even as printing remains under some pressure. As we adjust our forecasts and transfer coverage to a new analyst, we are increasing our fair value to $31 from $27, largely driven by slightly less punitive margin assumptions, even as our overall growth outlook remains largely unchanged. We assume that HP will only see mild margin degradation in the future, even as the PCs and printer markets remain intensely competitive and as the higher-margin printer business slowly declines. We expect cost controls to mostly offset pricing and margin pressure. We also expect minimal revenue growth over the next 5 years, projecting a compound annual growth rate of 1%. Updated guidance was mostly in line with previous ranges with the full-year EPS outlook narrowed to a range of $3.30-$3.60 from a previous range of $3.25-$3.65. With no surprises in results or guidance, we view shares as roughly fairly valued and remain skeptical of any dramatic changes in PC demand driven by the introduction of artificial intelligence PCs.

HP is a legacy technology titan with a strong share in the personal computer and printer markets. The PC and printer markets are consolidated, with the top several players controlling the majority of each market. The printer market is in a slow secular decline while growth in PCs is also minimal, tending to oscillate with overall refresh cycles as equipment ages and technology improves. The covid-19-driven work-from-home trend led to an unusual boost in demand for PCs, which has now receded.

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.