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On Friday, JPMorgan updated its outlook on HP Inc. (NYSE:HPQ) stock, raising the price target to $42 from $38 while maintaining an Overweight rating. The firm's analysis indicates that HP is likely to meet consensus estimates and reaffirm its commitment to achieving its full-year earnings guidance.
The assessment by JPMorgan is based on various data points from the PC industry over the recent months. Original Design Manufacturers (ODMs) have reported healthy sell-in and inventory levels going into the third quarter of 2024.
Additionally, channel partners have observed an improvement in demand and pricing trends. Market research firm Gartner (NYSE:IT) has also reported a quarter-over-quarter shipment growth of 8%, with HP specifically seeing a 14% increase in the second quarter of 2024.
The financial performance expectations for HP are similar to those from 90 days ago. However, the company's stock is now trading at a historical trading multiple of approximately 10 times earnings, which contrasts with its significant discount during the previous quarter's earnings announcement.
JPMorgan notes that while the financial outcomes may not be surprising this time around, a strong financial report should confirm HP's effective execution to investors. The firm anticipates a more significant recovery in volumes going into fiscal year 2025, driven by factors such as a substantial PC refresh cycle and the adoption of AI in PCs.
The new price target of $42 is set for December 2025, applying a 10 times multiple on the firm's earnings forecast for the out-year, an increase from the previous December 2024 target of $38. This adjustment reflects JPMorgan's confidence in HP's performance and market position.
InvestingPro Insights
InvestingPro data provides a deeper insight into HP Inc.'s (NYSE:HPQ) current financial standing, which can help investors gauge the company's market position as highlighted by JPMorgan's updated outlook. HP's market capitalization stands at $34.33 billion, indicating a substantial presence in the industry. The company's P/E ratio, at 11.8, suggests that the stock might be trading at a reasonable price relative to near-term earnings growth, which is further supported by a lower adjusted P/E ratio of 10.58 for the last twelve months as of Q2 2024.
Moreover, HP has demonstrated a commitment to returning value to shareholders, as evidenced by its impressive track record of raising its dividend for 7 consecutive years and maintaining dividend payments for 54 consecutive years. The current dividend yield is 3.14%, which is attractive to income-focused investors. Additionally, the company has experienced a strong return over the last five years, reassuring long-term investors of HP's market resilience.
InvestingPro Tips further enrich this perspective by highlighting that HP is a prominent player in the Technology Hardware, Storage & Peripherals industry and has a strong free cash flow yield, which is a positive sign for future investments and financial health. For those interested in further insights and tips, InvestingPro offers additional guidance, with a total of 11 InvestingPro Tips available for HP Inc. at https://www.investing.com/pro/HPQ, which can provide more detailed investment strategies.
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