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On Wednesday, TD Cowen adjusted its price target on shares of HP, Inc. (NYSE:HPQ), increasing it to $39.00 from the previous $32.00, while maintaining a Hold rating on the stock. The firm's analyst pointed to HP's fiscal year 2025 earnings per share (EPS) outlook, which aligned with expectations, though the January 2025 EPS forecast fell short. The analyst noted that the near-term demand for personal computers (PCs) is weakening, which is expected to continue into the next year.
The report further highlighted that artificial intelligence-enabled PCs, which constituted 15% of the unit mix in the October quarter, might contribute to a mid-single-digit percentage growth in the Personal Systems (PS) segment in the upcoming year. However, the analyst projected that the Printing segment could experience a low-single-digit percentage year-over-year decline. This is attributed to current market trends and unfavorable Japanese yen exchange rates.
The analyst also mentioned HP's free cash flow (FCF) target for fiscal year 2025, which is set between $3.2 billion and $3.6 billion, indicating an increase by a low-single-digit percentage year-over-year. This expectation is based on the company's ongoing cost restructuring efforts.
Despite the increased price target, the Hold rating suggests that TD Cowen sees limited upside potential for HP stock at the current time. The firm's analysis reflects a cautious outlook on HP's performance in the face of softening PC demand and a mixed growth forecast for its business segments.
In other recent news, HP Inc (NYSE:HPQ). reported a 2% year-over-year rise in Q4 2024 revenue and a 3% growth in non-GAAP EPS to $0.93. Both Personal Systems and Print segments showed progress, particularly in commercial markets and with the introduction of AI PC innovations. Despite a cautious outlook on the PC market recovery and an expected decline in the print market, as noted by Citi, HP's management remains optimistic about future performance.
The company generated $3.3 billion in free cash flow, nearly all of which was returned to shareholders, and increased its annual dividend by 5% to $1.16 per share. AI PCs, which accounted for 15% of Q4 shipments, are expected to rise to 25% in fiscal 2025. HP Inc. anticipates growth in the commercial PC market to outpace that of the consumer segment. The company's outlook for fiscal 2025 predicts revenue and non-GAAP EPS growth, with a stronger performance anticipated in the latter half of the year.
InvestingPro Insights
To complement TD Cowen's analysis, recent data from InvestingPro offers additional perspective on HP's financial position. The company's P/E ratio of 13.63 and adjusted P/E ratio of 11.89 for the last twelve months as of Q3 2024 suggest that HP is trading at relatively modest valuations compared to its earnings. This aligns with an InvestingPro Tip indicating that HP is "Trading at a low P/E ratio relative to near-term earnings growth."
Despite the analyst's concerns about weakening PC demand, HP's financial metrics show some positive signs. The company's revenue for the last twelve months as of Q3 2024 stood at $53.32 billion, with a gross profit of $11.8 billion. An InvestingPro Tip highlights that HP "Has maintained dividend payments for 54 consecutive years," which may be attractive to income-focused investors, especially considering the current dividend yield of 2.82%.
It's worth noting that HP's stock has shown strong performance, with a one-year price total return of 41.83% as of the latest data. This performance, coupled with the fact that the stock is trading near its 52-week high (98.24% of the high), suggests investor confidence despite the challenges outlined in the TD Cowen report.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on HP, providing a broader perspective on the company's financial health and market position.
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