HP beat 2Q, driven by commercial and premium PC growth (primarily higher ASPs), while the Print segment was largely in-line. HP modestly raised the FY22 EPS guidance midpoint.
Long remains wary of PC growth, mainly driven by ASPs and earnings growth led specifically by buybacks.
Wells Fargo analyst Aaron Rakers maintained an Equal-weight on HP with a price target of $35. Rakers was upbeat on PC momentum and improving trends in the printing market.
He remained Equal Weight rated on HP as he believed investors would begin to focus more on peaking COVID-driven fundamentals in the mid/2H2021 time frame.
With increasing concerns over consumer demand (particularly in Europe, accounting for 37% of HP's revenue) and persisting/increasing supply chain constraints, HP delivered net positive results.
HP continues to execute on driving an increased growth-oriented portfolio of gaming, peripherals, workforce solutions, Instant Ink, and industrial graphics, growing double-digits Y/Y; $5.6 billion in 1HF2022 revenue, well on track to $10 billion F2022 target.
HP also emphasized strong commercial PC growth, forming 65% of PSG revenue vs. ~76% of Dell Technologies Inc's DELL PC revenue in the Apr quarter.
HP remains a significant capital return story, returning $1.272 billion in dividends ($262 million) and share repo ($1.010 billion) in 2Q22, reiterating the FY22 FCF guide of at least $4.5 billion. HP remains committed to a $4 billion share repo in FY22 ($2.518 billion spent in 1H22).
Citigroup analyst Jim Suva maintained HP with a Neutral and raised the price target from $38 to $40. Suva acknowledged the upbeat results while remaining wary of competitor Dell posting much stronger results and outlook.
The price target reflected slightly higher earnings and rolled forward one quarter. The re-rating reflected Suva's preference for Dell, given its valuation discount and the shift from consumer to enterprise demand benefits Dell more than HP.
Price Action: HPQ shares traded higher by 4.63% at $40.64 on the last check Wednesday.
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