HP shares plummeted by over 6% after the company reported Q3 earnings below expectations, citing weak PC pricing and printer shipment concerns. Bernstein analysts see the potential for PC revenue improvement, while Credit Suisse and Deutsche Bank analysts express worries about HP’s print segment and long-term viability. Despite challenges, positive operating margins and share repurchases offer some optimism.
HP’s share price dropped by more than 6% during the early trading session on Wednesday as a result of missing revenue targets. The well-known printer and Computer manufacturer revealed its fiscal third-quarter earnings, which failed to impress Wall Street.
According to Refinitiv, HP’s revenue stood at $13.2 billion, a figure below the anticipated $13.37 billion forecasted by analysts. On the bright side, adjusted earnings per share were on par with predictions, amounting to 86 cents. However, the company’s outlook appeared lackluster, as it highlighted that the improvement in PC pricing fell short of its initial hopes.
Bernstein analysts conveyed their disappointment in HP’s quarterly performance, yet they expressed optimism for a potential rebound in PC revenues in the coming quarters. The analysts noted that the printing division could be a more persistent challenge.
In a note issued on Wednesday, Bernstein analysts stated, “While PC revenues might regain strength, concerns linger around weakened printer shipments impacting future growth. HPQ’s margins, higher than pre-pandemic levels, remain a positive point; however, we express concerns about the long-term prospects of its printing business and its capacity to thrive.”
Similarly, Credit Suisse analysts echoed apprehensions about HP’s print division, particularly due to discussions concerning its “long-term vulnerabilities” and the potential necessity for “more assertive pricing.” The analysts indicated in their Wednesday report that they are revising their estimates for both the fourth fiscal quarter and the entire fiscal year.
Deutsche Bank analysts also adjusted their perspective on HP, lowering the price target from $32 to $30. They acknowledged that the company’s results were somewhat aligned with expectations, yet factors like “weaker demand due to a slower recovery in China” and a bleak outlook for the print business influenced their decision.
Despite these concerns, the Deutsche Bank analysts identified positive aspects within the report.
“In the face of a challenging demand environment, we continue to commend HPQ for maintaining robust operating margins across its segments,” the analysts noted on Tuesday. “We are also heartened by the company’s intentions to recommence share repurchases, aiming to counterbalance dilution in the short term.”
