HP analysts turn cautious as macro concerns challenge near-term potential

  • Swiss credit analyst Shannon Cross retrogrades HP Inc. (NYSE: HPQ) from Outperform to Neutral with a price target of $33.

  • Cross believes revenue and margins are challenged in the near term by weakening consumer confidence, which accounts for about 50% of PC revenue.

  • She also expects pressure on ASPs due to lower demand and better supply, returning part of the margin expansion that began in 2019.

  • She predicts a short-term impact from slowing business demand for PCs and printing as IT budgets prioritize hybrid cloud, security and software solutions.

  • It also highlights macroeconomic uncertainty, which impacts purchasing decisions for 3D printing and commercial printing.

  • Citigroup analyst Jim Suva maintains neutral on HP and cuts price target from $33 to $31.

  • He will hear from PC and enterprise infrastructure vendors in the next two weeks.

  • The weakening end-demand environment for PCs, smartphones and printers amid regional macroeconomic and inflationary concerns in recent earnings is likely to remain critical areas.

  • Demand for enterprise infrastructure remains an area of ​​relative strength (Lenovo Group Ltd (OTC: LNVGY)), given the high levels of arrears.

  • But recent mixed reviews from Cisco Systems, Inc. (NASDAQ: CSCO) on weaker order growth and Advanced Micro Devices, Inc. (NASDAQ: AMD) and Dell Technologies Inc. (NYSE:DELL) last quarter in terms of order strength and corporate caution are notable.

  • He thinks macroeconomic concerns could have a significant impact on infrastructure demand in the coming quarters.

  • Order books and order visibility will be the areas of focus and cash generation/return on capital.

  • It cut estimates on HPQ and Dell based on weakening PC conditions.

  • Price action: HPQ shares traded down 0.31% to $29.34 when last checked on Friday.

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