On Wednesday, HSBC upgraded shares of HP, Inc. (NYSE:HPQ) from Hold to Buy, with an increased price target of $33, up from the previous $30. The revision follows a reported uptick in the global personal computer (PC) market, marking the first instance of growth after two years of decline.
The global PC market saw a 3% year-over-year increase in shipments during the fourth quarter of 2023, a notable change after seven consecutive quarters of negative growth. This modest rise is seen as a potential early sign of a new refresh cycle for PCs, which were purchased in large numbers during the COVID-19 pandemic and before.
"This also comes at a time when the sector is approaching the end of life of Windows 10 in October 2025 and increasing number of AI-capable PCs are planned to be introduced to the market. All these factors offer tailwinds to the future demand in the sector. We, therefore, are now more optimistic on the PC demand outlook over 2024-25," said the analyst in a note.
Market research firm Canalys has projected an 8% year-over-year growth in PC shipments for the fiscal year 2024, providing a basis for the analyst's optimistic stance on the sector's future. This forecast aligns with the broader expectation of a rebound in PC demand, which could benefit companies like HP, Inc. in the coming years.
InvestingPro Insights
Following HSBC's upgrade of HP, Inc. (NYSE:HPQ) to Buy with a higher price target, it's worth noting that HPQ is currently trading at a low P/E ratio relative to near-term earnings growth, with a P/E Ratio (Adjusted) of 7.28, well below the industry average. This may indicate that the stock is undervalued, particularly when considering the company's track record of raising its dividend for 7 consecutive years, showcasing a commitment to returning value to shareholders.
Moreover, HPQ has maintained dividend payments for an impressive 54 consecutive years, which is reflected in a substantial dividend yield of 3.92%. This could be particularly attractive to income-focused investors. The company's status as a prominent player in the Technology Hardware, Storage & Peripherals industry, combined with the expected rebound in PC demand, positions it favorably in the market. Revenue for the last twelve months as of Q4 2023 stood at $53.72B, despite a year-over-year decline, indicating the company's significant scale.
InvestingPro Tips suggest that HPQ's valuation implies a strong free cash flow yield, which is a positive sign for investors looking for companies with the potential for robust cash generation. For those interested in a deeper analysis, there are 11 additional InvestingPro Tips available for HPQ at https://www.investing.com/pro/HPQ, which could provide further insights into the company's financial health and market position. Take advantage of these insights and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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