JPMorgan says HP is on the verge of revenue and profit growth as the PC industry appears ready to pick up again later this year. Analyst Samik Chatterjee upgraded HP shares to overweight from neutral. He also raised his yearend price target to $35 from $30, which implies 17% upside from Friday’s close. “We are looking to turn a corner in relation to the headwinds that have plagued the PC end-market,” Chatterjee wrote in a note Monday. “We have found the latest data points in relation to PC shipments reinforcing our view of a 2H recovery embedded in our PC model, implying a 21% H/H increase in units in 2H23 (admittedly off a low base), which should set up the PC business segments for … a robust ramp in revenue and an even stronger ramp in profits helped by leveraging a leaner cost structure on account of the costs actions taken,” Chatterjee continued. The analyst also foresees “resilient” revenue and margins in HP’s printer business, saying that he “expect[s] to see more steady moderation in margins as supply constraints in relation to lasers impacting Printer supply continue and in-turn support robust margins.” He added that structural margin improvement in the printer segment should help HPQ offset some of the downward pressures from easing supply. While Chatterjee lowered his estimates for margins in the printer segment in future quarters as a result of improving supply, his overall projections for HPQ are still higher due to a robust recovery expected in its personal systems segment. The analyst admitted that HP still faces long-term challenges in its printer segment. “Over the long term, we acknowledge that HPQ’s position in the secularly declining Print business is more challenged relative to Dell’s positioning in Servers and Storage, and that valuation for HPQ is less attractive at 8.0x 2024E EPS (vs. Dell at 6.7x),” said Chatterjee. The PC company’s stock was up 2.35% Monday in premarket trading. Shares have jumped almost 11% in 2023 amid a rally in tech shares, after slumping almost 29% in 2022. HPQ YTD mountain HP stock —CNBC’s Michael Bloom contributed to this report.
