Argus Raises Price Target On HP, Sees Improving Margins And A Balanced Business Mix

HP Inc HPQ reported robust Q3 results, with solid printing profits and the PC business gaining share. The company is “managing through secular transitions and cyclical challenges, while boosting margins at an impressive pace,” Argus’s Jim Kelleher said in a report. He maintained a Buy rating on the company, while raising the price target from $16 to $19.

HP recorded non-GAAP EPS growth of 35 percent in 3Q16. The surge in the company’s profitability reflected a more balanced business mix. Most of the profit growth was driven by PC, where HP scored well with upper-tier consumer machines, as well as in the gaming market with its OMEN devices, analyst Kelleher noted.

Combating Challenges Ahead

Fundamentals in both printing and PCs continue to exhibit a secular decline, while several global economies are showing weakness. “HP, however, is doing a solid job maintaining and expanding market share in PCs while driving more profit to the bottom line,” Kelleher commented.

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HP’s next challenge would be to execute programs in its printing business aimed to reduce channel inventory, while increasing marketing spending in its printing supplies business. The analyst pointed out that HP had managed to generated margin expansion “at an impressive pace,” despite facing secular transitions and cyclical challenges.

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