Thursday, an analyst from TD (TSX:TD) Cowen updated their outlook on HP, Inc. (NYSE:HPQ), increasing the price target to $32 from the previous $30 while keeping a Hold rating on the stock. The revision follows HP's fiscal second-quarter results, which slightly surpassed consensus expectations. Notably, the analyst pointed out the company's Personal Systems (PS) division, which saw a year-over-year revenue growth of 3%.
The positive performance of the PS division is attributed to strong sales of new AI-enabled PCs and the ongoing Windows 11 refresh cycle. Despite a continued weak demand in the Printing segment, HP's solid profit margins are contributing to the firm's ability to maintain its fiscal year 2024 free cash flow (FCF) forecast at approximately $3.3 billion.
The company's financial strategy includes plans to return capital to shareholders, a move that appears feasible given the current financial health and expectations for the rest of the year. Additionally, the analyst noted that the premium pricing of HP's AI PCs, which is about 5-10% higher than non-AI models, is viewed as a positive factor for the company's revenue growth.
Investors and market watchers are keeping an eye on HP's performance as it navigates the competitive tech landscape. The upgraded price target reflects a modest optimism in HP's ability to leverage its new product offerings and capitalize on the market's shift to newer operating systems like Windows 11. The hold rating indicates that, while there are positive developments, the analyst suggests a cautious approach until more substantial growth or changes occur.
InvestingPro Insights
As HP, Inc. (NYSE:HPQ) continues to demonstrate financial resilience and innovation in its product offerings, particularly in the Personal Systems division, InvestingPro data and tips provide additional context for investors considering the company's stock. With a market capitalization of $32.09 billion and a P/E ratio that stands at 9.64, HPQ is trading at a valuation that is attractive when juxtaposed with its near-term earnings growth potential. The company's ability to maintain a strong dividend payout, evidenced by a dividend yield of 3.36% and a track record of raising dividends for 7 consecutive years, underscores its commitment to shareholder returns.
InvestingPro Tips suggest that HPQ's stock may be in overbought territory, as indicated by the RSI, but it also trades with low price volatility, providing a relatively stable investment opportunity. Moreover, HPQ is a prominent player in the Technology Hardware, Storage & Peripherals industry, which could benefit from the ongoing Windows 11 refresh cycle and the introduction of AI-enabled PCs.
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