Morgan Stanley cuts HP stock price target to $26 from $29

On Thursday, Morgan Stanley (NYSE:MS) analysts issued a new price target for HP, Inc. (NYSE:HPQ) shares, reducing it to $26.00 from the previous $29.00 while maintaining an Equalweight rating. The adjustment comes after HP management’s recent earnings guidance, which suggested a steeper than anticipated decline in PC growth and earnings per share (EPS) expectations for the full year. Currently trading at a P/E ratio of 9.8x and offering a 4.26% dividend yield, HP has maintained dividend payments for 55 consecutive years. According to InvestingPro analysis, the stock appears undervalued at current levels.

The analysts cited several challenges impacting HP’s outlook, including increased tariff costs, a slump in demand for printing and supplies, anticipated weaker PC demand due to higher prices, and a rise in working capital needs. These issues, they noted, were not entirely mitigated by cost-cutting measures. Although some headwinds, like tariff costs, may be alleviated by the fourth fiscal quarter, the overall picture remains uncertain. Despite these challenges, InvestingPro data shows HP maintains a "GOOD" financial health score, with revenue of $53.9 billion in the last twelve months and a solid gross profit margin of 21.85%.

HP’s growth areas are currently too small and lack transparency to significantly influence the company’s performance, according to the analysts. Furthermore, they projected that cost reductions would only partially protect profitability, leading to an EPS for the fiscal year 2026 that is expected to be roughly on par with fiscal year 2024. The analysts also pointed out that HP’s increased leverage is likely to restrict capital returns over the next few quarters.

In their commentary, the Morgan Stanley team expressed skepticism about the potential for a company-specific catalyst that could revitalize investor enthusiasm and lead to a revaluation of the stock’s multiple. Despite the stock’s relatively low valuation at approximately 7.5 times the new fiscal year 2026 EPS estimate of $3.32, the analysts did not foresee any imminent factors that could reignite the bull case for HP shares.

In other recent news, HP Inc. reported mixed financial results for the latest quarter, with a revenue of $13.2 billion, slightly surpassing expectations, but an earnings per share (EPS) of $0.71, which fell short of the consensus estimate of $0.80. This earnings shortfall has led several analysts to adjust their price targets for HP. UBS lowered its target to $26, citing increased tariffs and commodity costs that impacted margins, while maintaining a Neutral rating. Evercore ISI reduced its target to $29, maintaining an Outperform rating, and noted that despite challenges, HP anticipates improved EPS in the second half of fiscal year 2025 due to cost savings initiatives.

Citi also adjusted its target to $27.50, aligning with a more subdued PC industry outlook, while JPMorgan set a target of $27, noting macroeconomic concerns and tariff-related pressures. Goldman Sachs further reduced its target to $26, highlighting the impact of higher-than-expected tariff costs on HP’s Personal Systems EBIT margin. Despite these challenges, HP has shown growth in its Personal Systems revenue and is working on supply chain adjustments to mitigate tariff impacts by the fourth quarter. Analysts from these firms emphasize the ongoing uncertainties in the tariff landscape and macroeconomic climate as key factors influencing HP’s future performance.

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