HP Inc's HPQ third-quarter revenue decreased 4.1% year-over-year to $14.7 billion, which missed average analyst estimates. The company reported quarterly earnings of $1.04 per share, which was in line with average analyst estimates.
Barclays analyst Tim Long reiterated an Underweight and price target of $27. HPQ missed 3Q revenue on faltering demand across PC and Print, while buybacks aided in-line EPS. HPQ cut FY22 EPS and FCF by a wide margin.
Long said that inventory correction and ASP degradation are just getting started.
Credit Suisse analyst reiterated Outperform and cut the price target from $39 to $33. HPQ reported 3Q results that missed the topline owing to weaker consumer demand and increased pressure on the macro, which led to abrupt deterioration late in the quarter.
Personal Systems revenue was 7% below his estimate, with PC weakness now spilling over to the Commercial side. However, he expects a higher mix of premium devices and peripherals to offset partially.
Print revenue was 5% below his estimate, reflecting continued component shortages and supply constraints. The analyst believes that growing Instant Ink revenue and HP+ traction will help the company lock in more recurring revenue.
Reflecting overall macro weakness, HPQ cut F2022 non-GAAP EPS guidance and lowered FCF guidance. The analyst expects the stock to be range bound in the near term with cash flow and share repurchase offsetting topline pressure but thinks focusing on peripherals could drive upside.
Citi analyst Jim Suva cut the price target from $37 to $33. It is no secret that demand for PCs is slowing, but braced for increased PC competition, likely impacting margins in the quarters ahead.
Suva was impressed with HP's cash flow and stock buyback, but now, investors will be cautious on PC exposure stocks and watch how holiday sales and promotions progress in the months ahead.
Suva notes HP recently completed the acquisition of Poly, which will help sales and EPS, but the slowdown in PC demand will more than offset the M&A help.
Wells Fargo analyst reiterated Underweight and cut his price target from $30 to $25 following the company's significantly reduced forward outlook.
He believes the company's results reinforce his belief that shares could see relative underperformance until there are clear signs of PC end demand stabilization and lifting macro-driven concerns on print.
Morgan Stanley analyst Erik Woodring remained Underweight and cut the price target from $30 to $28 as he reduced his estimates. Woodring highlighted that HPQ's 3Q miss and 4Q guide down were the largest in more than five years and reflected both consumer and commercial demand challenges, a product of macro and micro factors.
Price Action: HPQ shares traded lower by 7.22% at $28.86 on the last check Wednesday.
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