TSX gains after CPI shows US inflation rose 3%
Investing.com -- JPMorgan has downgraded HP Inc. to Neutral from Overweight, saying the company is entering a more challenging phase as it moves past the most favorable part of the PC volume and cost cycle.
The bank maintained its December 2026 price target of $30 per share, implying limited upside from current levels of $28.16.
HP shares fell more than 2% in premarket trading to $27.50.
Analyst Samik Chatterjee wrote that 2026 will mark “the tail end of the Windows 10 replacement cycle,” creating tough comparisons for HP’s commercial PC business.
He also cited “a challenging macro environment with limited catalysts to stimulate a replacement cycle for Consumer PCs,” and rising memory costs that are likely to weigh on margins as the company struggles to pass higher input prices on to customers.
JPMorgan lifted its 2025 PC shipment forecast to 6.6% year-on-year growth from 1.8% previously, helped by moderating tariff concerns and stronger Windows 10 upgrades.
However, it now expects shipments to decline 2.2% in 2026, reflecting the late stage of the replacement cycle and a high base from 2025. “The lapping of these significant volume tailwinds in 2025 is likely to drive higher competitive intensity amidst a tougher commodity cost backdrop,” Chatterjee wrote.
The analyst said HP’s gross margins are among the most sensitive in IT hardware to memory price fluctuations, noting that a 10% change in NAND prices typically leads to about 80 basis points of change in total gross margin.
Although the impact of rising costs has so far been limited, he expects pressure to build in fiscal 2026 as inventory buffers diminish.
JPMorgan forecasts low-single-digit revenue growth and mid-single-digit earnings growth next year, with modest margin moderation. The bank expects modest growth in HP’s Personal Systems segment to partly offset continued weakness in printing, as PC demand normalizes after the Windows 10 upgrade cycle.
While buybacks are expected to continue supporting EPS, Chatterjee said HP shares already trade roughly in line with their long-term multiple.
"We see limited upside for the shares at this time and will await greater visibility into an improving macro environment and/or a more favorable commodity cycle," he said.