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On Thursday, JPMorgan analyst Samik Chatterjee reduced the price target on HP Inc. (NYSE:HPQ) to $27 from $30, while maintaining an Overweight rating. The adjustment comes as HP navigates a challenging macroeconomic environment that is influencing its revenue expectations for the second half of fiscal year 2025. The company is also expediting its supply chain migration strategies to counterbalance tariff-related cost pressures. According to InvestingPro data, HP currently trades at $27.20 with a P/E ratio of 9.81, suggesting relatively attractive valuations despite the challenges. The company maintains a solid financial health score of "GOOD" and offers a notable 4.26% dividend yield.
HP is employing a strategy of price increases and supply chain modifications to mitigate the impact of tariffs on profit margins. However, the full neutralization of these headwinds is not anticipated until the fourth quarter of fiscal year 2025, with the third quarter still likely to be affected. In response to the tariffs, HP is shifting its supply chain to serve U.S. demand from locations outside China and is taking further cost-cutting measures as part of its Future Ready initiative. With annual revenue of $53.88 billion and a gross profit margin of 21.85%, the company faces some margin pressure, as highlighted in InvestingPro’s analysis, which identifies weak gross profit margins as a key challenge among its 10+ available insights.
The company expects that these actions will allow both its Personal Systems (PS) and Printing (Print) segments to align with their long-term margin targets by the end of the year. Despite these efforts, the unpredictability of the tariff landscape and potential for additional headwinds from increased tariffs or the reintroduction of reciprocal tariffs on certain non-China geographies remain a concern for investors.
Apart from tariff-related challenges, HP’s management is also factoring in a potential decline in demand due to the uncertain macroeconomic climate and price increases across product categories. This cautious outlook is anticipated to be echoed in the reports of other IT hardware companies in the coming weeks, with enterprise customers’ confidence affected by the broader economic situation.
In light of these factors, Chatterjee has revised downward the earnings estimates for HP for fiscal year 2025, as well as the revenue and earnings projections for fiscal year 2026. The lowered price target of $27 reflects these near-term challenges and the anticipated limited investor enthusiasm for HP stock in the short term.
In other recent news, HP Inc. reported mixed results for its second quarter of 2025. The company’s earnings per share (EPS) were $0.71, falling short of analyst expectations of $0.79, although revenue surpassed forecasts, coming in at $13.2 billion against the anticipated $13.07 billion. Despite this revenue beat, the company faced challenges due to higher-than-expected tariff costs, impacting its Personal Systems segment margins. Goldman Sachs subsequently adjusted its price target for HP to $26 from $33, maintaining a Neutral rating on the stock. The firm cited the earnings miss and ongoing tariff issues as key factors in the revised outlook.
HP experienced a 7% year-over-year growth in Personal Systems revenue, aligning with expectations, and achieved market share gains in more profitable categories. The company’s Print division saw an improvement in EBIT margins to 19.5%, exceeding the targeted range. However, HP revised its outlook for PC unit growth in fiscal year 2025 to low single-digit percentages due to macroeconomic uncertainties. Efforts are underway to mitigate tariff impacts, with HP planning to cease selling products from China in the US by June, which could improve margins.
The company is also diversifying its manufacturing locations and has launched an AI-driven PC portfolio, aiming to capture a significant portion of the PC business by year-end. HP’s strategic investments in AI and manufacturing diversification are expected to support long-term growth, according to company executives.
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