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HSBC bullish on HP Inc. as PC sector nears potential refresh

Published 02/14/2024, 08:30 PM
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HPQ
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HSBC Research has upgraded HP Inc. (NYSE:HPQ) to a Buy rating (From Hold) and raised their 12-month price target on the technology stock to $33.00 (From $30.00) as analysts at the firm are “optimistic” on the recovery of the global PC sector.

“We expect HP to benefit from positive sector dynamics and expanding margins,” wrote HSBC in a note.

The global PC market, after seven quarters of decline, saw a 3% YoY growth in 4Q23, marking a potential refresh cycle for PCs purchased during the pandemic. With Windows 10 approaching end-of-life in October 2025 and the introduction of AI-capable PCs, the sector's future demand looks promising. Technology analysts firm, Canalys is forecasting 8% YoY growth in PC shipments for FY24.

“HP is the second largest PC vendor in the world. We think that the growth in HP’s personal systems segment will, therefore, track the sector trends. In fact, growth in PC shipments by HP has been consistently higher than the sector average since 1Q23.” HSBC added.

Analysts have upgraded their expectations for HP’s personal segment and now expect 5-6% YoY revenue growth, starting in the second half of 2024.

HSBC believes that the current stock price presents an appealing opportunity for investors. They emphasize HP's robust free cash flow generation, an attractive free cash flow yield exceeding 11%, and a growing dividend per share profile.

Shares of HPQ are up 1.78% in pre-market trading Wednesday morning.

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