HP (NYSE:HPQ) stock is down about 4.9% in the pre-market session on Wednesday following its mixed second-quarter results. The manufacturer of personal computing, printing products, and accessories delivered better-than-expected bottom-line results on the back of cost-cutting initiatives and an improved mix. However, the demand-constrained environment and industry-wide inventory issues weighed on its sales. Given the soft demand trends, Wall Street analysts remain sidelined on HPQ stock.
HPQ’s top line is taking a hit due to industry-wide headwinds that include corporate budget tightening and a slowdown in consumer demand. Further, competitive pricing remains a drag. While lower revenues and higher interest rates are taking a toll on its profitability, the company is focusing on reducing costs and improving its mix to cushion its bottom line.
While the demand environment remains challenging, HP announced that it reduced its channel inventory in Q2, which is positive. In addition, the company expects the industry-wide channel inventory to normalize in Q3.
Coming out of the Q2 conference call, Goldman Sachs analyst Mike Ng reiterated a Hold recommendation on HPQ stock. While the analyst is optimistic about the improvement in the PC market, the weakness in the Printing segment keeps him sidelined.
Nonetheless, the analyst raised his earnings estimates for the next several Fiscal years as he expects the company to aggressively buyback shares.
HPQ has paused buybacks. However, given its strong free cash generation capabilities and focus on returning cash to its shareholders, the company could soon resume share repurchases. During the earnings conference call, HPQ’s management stated that the company could start buying back shares in Q4.
Is HPQ Stock a Buy or Sell?
Given the slowdown in demand, Wall Street remains sidelined on HPQ stock. It has received one Buy, Four Hold, and one Sell recommendation for a Strong Buy consensus rating. Further, analysts’ 12-month average price target of $30 implies 3.01% downside potential from current levels.
According to TipRanks data, the most accurate analyst for HPQ stock is Wamsi Mohan of Bank of America Securities. Copying his trades on HPQ stock and holding each position for one year could result in 50% of your transactions generating a profit, with an average return of 6.24% per trade.
