California-based HP Inc. (HPQ) makes personal computers and printers and offers related solutions.
HP recently acquired Choose Packaging, a plastic-free product packaging company. Choose has developed paper-based bottles that can hold various liquid products and provide an alternative to plastic bottles. HP counts on the Choose acquisition to support its strategy to disrupt the sustainable packaging market.
For Fiscal Q1 2022 ended January 31, HP reported an 8.8% year-over-year rise in revenue to $17 billion and exceeded the consensus estimate of $16.5 billion. It posted adjusted EPS of $1.10, which rose from $0.92 in the same quarter the previous year and beat the consensus estimate of $1.02.
HP ended the quarter with $3.4 billion in cash. It plans to distribute a quarterly dividend of $0.25 per share on April 6. HPQ stock currently offers a dividend yield of 2.48%, compared to the sector average of 0.69%.
With this in mind, we used TipRanks to take a look at the risk factors for HP.
Risk Factors
According to the new TipRanks Risk Factors tool, HP’s main risk category is Finance and Corporate, with 12 of the total 32 risks identified for the stock. Macro and Political and Production are the next two major risk categories with 6 and 4 risks, respectively. Here are the takeaways from HP’s risk profile.
HP informs investors that its corporate bylaws contain provisions that could make it difficult for a third party to acquire it. The company particularly points out a provision that allows its board to thwart hostile takeover attempts through the issuance of a special type of shares. Therefore, the company cautions that such provisions could deter a takeover that shareholders may otherwise deem favorable.
During Q1, HP repurchased $1.5 billion of its shares. The company explains that its share repurchase program has no expiration date. However, it cautions that the program may be terminated at any time as a result of factors such as changes in tax laws and share price volatility. Additionally, it says that even if the repurchase program is fully executed, it may not enhance long-term stockholder value as intended.
Finally, HP cautions that its business could be adversely affected by the Russia-Ukraine conflict given the international nature of its operations. The company explains that about 65% of its revenue in Fiscal 2021 was generated outside the U.S.
HPQ has gained about 23.01% over the past 12 months.
Analysts’ Take
Barclays analyst Tim Long recently reiterated a Sell rating on HP stock with a price target of $30, which suggests 17.01% downside potential.
Consensus among analysts is a Hold based on 1 Buy, 4 Holds, and 1 Sell. The average HP price target of $36.83 implies 1.88% upside potential to current levels.
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