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On Thursday, Citi analysts adjusted their outlook on HP, Inc. (NYSE:HPQ) by reducing the price target from $29.00 to $27.50, while sustaining a Neutral rating on the stock. Currently trading at $27.2, HP maintains a P/E ratio of 9.8x and offers a substantial 4.26% dividend yield. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value model. The adjustment follows HP’s recent earnings report, which resulted in the company’s shares falling approximately 8% due to weaker-than-expected earnings and downward revisions to their fiscal year 2025 outlook. Despite revenues for the quarter coming in slightly above expectations, with the company generating $53.88 billion in the last twelve months, the earnings were impacted negatively by higher-than-anticipated tariff costs and supply chain adjustments made to counteract those tariffs. InvestingPro data reveals that management has been aggressively buying back shares, and the company has maintained dividend payments for 55 consecutive years.
The revised forecast by Citi now aligns with a more subdued PC industry outlook, which is expected to see low single-digit year-over-year growth, consistent with Citi’s own projection of a 2% increase. HP’s management anticipates an improvement in operating margins and predicts a significant rise in the fourth quarter owing to current mitigation strategies.
In light of these developments, Citi has revised its estimates for HP, leading to the lowered price target, which still assumes an unchanged price-to-earnings (PE) multiple of 8 times. The firm’s analysts are scheduled to meet with HP’s management on June 2 to discuss the company’s strategies and outlook further.
In other recent news, HP Inc. reported mixed results for the second quarter of 2025, with earnings per share (EPS) of $0.71 falling short of analyst expectations, which were between $0.79 and $0.82. Despite this, the company exceeded revenue forecasts, generating $13.2 billion compared to the anticipated $13.07 billion. The earnings miss was largely attributed to higher-than-expected tariff costs, which impacted the Personal Systems segment’s earnings before interest and taxes (EBIT) margin. In response, HP is shifting its supply chain to reduce reliance on China and mitigate tariff impacts, with plans to have no products from China sold in the US by June. Analysts from JPMorgan and Goldman Sachs have adjusted their price targets for HP, with JPMorgan setting a target of $27 and Goldman Sachs reducing theirs to $26, both citing macroeconomic concerns and tariff challenges. HP remains optimistic about its long-term strategies, including the launch of an AI-driven PC portfolio expected to comprise 25% of its PC business by year-end. The company continues to invest in manufacturing diversification and AI innovations to support future growth.
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