The PC market is gearing up for a promising comeback, with analysts predicting positive outcomes for HP Inc. In an encouraging report, HP and other PC manufacturers are preparing to unveil a new line of PCs capable of running generative artificial intelligence (AI) software. This development comes after eight consecutive quarters of declining unit sales in the PC market. The increasing demand can be attributed, in part, to Microsoft’s plan to terminate support for Windows 10 in 2025. Another contributing factor is the anticipated refresh cycle for laptops purchased during the early stages of the pandemic.
Analysts Upgrade Rating and Project Growth
In light of these advancements, Evercore ISI analyst Amir Daryanani has upgraded his rating on HP stock from In Line to Outperform. Additionally, he has raised the target price from $33 to $40 per share. As a result, HP shares experienced a 3% increase on Monday, reaching $30.34.
Reasons for Optimism
Daryanani has listed several reasons behind his more optimistic assessment. Firstly, he expects HP’s profit to surpass $4 per share within the next 12 to 24 months. Current consensus estimates indicate a profit of $3.44 per share for fiscal year 2024, and $3.69 per share for 2025. The growth in earnings will be fuelled by a combination of share buybacks and operating expense controls. It is estimated that buybacks alone could contribute an additional profit of 30 to 50 cents per share over the next two years through a potential 15% reduction in share count.
Projected PC Market Recovery
Daryanani also highlights the anticipated recovery of the PC market as a crucial factor. He states, “Incoming data points and industry comments underscore our belief that the PC market is poised for a strong recovery in calendar 2024.” Furthermore, HP’s management expects the PC market to experience slight growth in 2024 and believes that AI PCs will double the expected market growth rate between 2024 and 2026.
Success and Strategy in the Printer Business
Daryanani commends HP’s printer business for achieving higher operating margins through effective strategy and execution.
HP stock has already seen an impressive rise of 13% this year.
