UBS analyst David Vogt downgraded HP (NYSE:HPQ) shares to Neutral from Buy with a $40.00 per share price target.
HPQ stock soared nearly 15% yesterday after it was disclosed that Berkshire Hathaway's (NYSE:BRKa) Warren Buffett acquired roughly 121 million shares, worth around $4.2 billion.
As a result, HP shares surged yesterday to a fresh all-time high above $40.00. Given that HP stock price hit UBS price target, the analyst sees a full validation.
Moreover, he cited other factors that contributed to his downgrade call, including incremental signs of softness in low-end Consumer PCs following recent checks over the past month along with the likelihood of a slower buyback next year following the expected close of the Plantronics (NYSE:POLY) deal in late CY22.
The current valuation of roughly $42.2 billion reflects the strong execution with the P/E multiple surging around 33% since late 2021.
"While use cases for PCs has expanded the TAM, we believe the risk that PC unit growth turns negative as early as the October quarter given supply chain headwinds and macro cross currents following recent checks is increasing. As such, considering the solid share outperformance over the past 12 months (HPQ ~28% vs S&P 500 ~12%) and a NTM P/E of 9.5x in-line with our target P/E, we are stepping to the sideline," Vogt added.
HPQ stock is down nearly 2% in pre-open Friday.
By Senad Karaahmetovic