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Stock Analysis & Ideas

HPQ Stock Forecast Is of a Mature Enterprise

HP (HPQ)’s performance has been steady and reliable over the years, despite a few setbacks. The company increased revenue this year despite its supply chain issues.

It was able to counteract these declines by raising prices. At first, HPQ’s revenue seems to be ebbing due to secular headwinds. More interestingly, it has many profitable “overlapping” ventures that might help its future. That is why you should not look at the HPQ stock forecast and become afraid of the limited upside.

Because usually, you’ll see the value in a company when it has already realized it. That’s what I see in HP. It seems like it’s getting this style of value realization through buybacks, which is sustainable given its conservative debt situation.

HP has experienced strong growth in its PC sales and will likely see continued success there.

I’m bullish on the stock.

Q1 2022 Earnings Highlight Consistency

HP topped Wall Street’s targets during the fiscal first quarter. The company is confident it can maintain strong commercial PC sales and improve throughout the year.

In Q1, HP reported $1 billion in earnings, or 99 cents a share. Recently, HP announced that revenue was $17 billion, up 9% from the previous year. This makes it the highest reported by HP since its separation in 2015.

HP’s PC revenue rose to $12.2 billion in the first quarter, 15% higher than last year. The Commercial segment has seen a 26% increase, while the Consumer segment has seen a 1% decrease.

HP’s revenue from printing was down by about 4%. Meanwhile, commercial sales went up 9%, and consumer sales dropped 23%.

HP expects to earn $1.05 per share with the midpoint of its guidance, handily beating expectations for $1.03 per share. HP has increased its revenue forecast for the fiscal year. It now expects adjusted earnings at $4.18 to $4.38 per share.

The company just announced that it’s giving $1.8 billion to its shareholders, who will be more than excited to get their hands on the money. This is done in the form of stock buybacks and dividends.

“Our Q1 performance was particularly strong across our key growth areas that collectively grew double-digits including gaming, peripherals, workforce solutions, consumer subscriptions, and industrial graphics and 3D,” Enrique Lores, Chief Executive Officer at HPQ, said in the earnings release.

HP is experiencing strong growth in gaming, industrial 3-D, and peripherals. All three are expected to generate a revenue of more than $10 billion this year, and there’s retention in the company’s new territories.

Still a Value Stock

HPQ has been considered a value stock for the past few years. It’s located in the tech sector, but it trades as slowly and cheaply as a value stock. However, over the past two years, things changed.

The price of HPQ has been fluctuating quite a bit, and it’s now a little higher than earlier. However, the stock is still trading at a modest P/E ratio, so it may not be too expensive either, which is why I find it compelling as an investment.

Investors realized that the company is a strong, mature enterprise that performs consistently. During the last 12 quarters, the company has beaten earnings estimates each and every time.

Investors often look out a little further than the next year to assess how much value a company/project has. You see, if you examine the cash flow forecast for 2021 and 2022, you’ll see that there’s an impressive $4 billion of free cash flow in 2021 and an expected $4.5 billion in 2022.

HP showed strong revenue growth in its Personal Systems businesses in the last several quarters, increasing investor confidence. HP’s Printing segment is also set to continue increasing revenue, which should also help matters.

As someone that has been following HP closely, I feel very confident in the company’s outlook. Its strong performance in its Personal Systems Division and the potential for its Printing Business to grow post-pandemic gives me hope.

Wall Street’s Take

HPQ stock has a Hold consensus rating on TipRanks, based on one Buy, four Holds, and one Sell assigned over the past three months.

The HP stock forecast is $36.83, representing 3.3% upside potential.

Bottom Line

It seems that HPQ is benefiting from its current solutions and advancements in technology. While the pandemic has affected many American companies, HPQ has seen significant improvements in its supply chain solutions compared to others.

HPQ is interesting because, for a long time, it has operated as a value stock. However, recent quarters have been excellent in terms of momentum. That doesn’t mean it’s not a good investment.

You can think that the market has finally priced the company accurately after a sluggish few years. Therefore, the HPQ stock forecast needs to be put into context.

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Read full Disclaimer & Disclosure.

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