BMO Notes What's Holding HP Inc Back

• In a recent report, BMO Capital Markets analyst Tim Long and his team initiated coverage of HP Inc HPQ with a Market Perform rating.
• The firm issued a $13 price target, which implies an upside potential of almost 7 percent from current valuations.
• According to the note, the experts believe that the secular headwinds that the company faces are too difficult to overcome.

According to the research note, the firm thinks the secular headwinds that the company faces are too hard to overcome.

In PCs, the experts anticipate some stability. However, secular stress around units and ASPs should linger. "Printing is a much bigger profit contributor and is facing more meaningful near-term impacts," they continued.

On top of the slowing demand for hardware and decreased average usage, the strength of the U.S. dollar versus the Japanese yen is leading some of its competitors to severely lower their prices. This in turn is translating into considerable revenue and margin pressures.

Consequently, the BMO is below consensus for a couple of years to come and will wait for revenue stabilization, especially in the printing segment, before they become more constructive on HP.

The analysts now model 2016 EPS of $1.60 on revenue of $$48.7 billion, and 2017 EPS of $1.63 on revenue of $46.5 billion.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.