HP's (HPQ) fiscal Q2 earnings guidance below consensus implies an "ambitious" profit ramp in H2 compared with the implied H2 profit from its guidance last quarter, which was already a record level for the company, Morgan Stanley said in a note Friday.

HP issued fiscal Q2 non-GAAP earnings per share guidance of $0.75 to $0.85, which Morgan Stanley said is below consensus, and reiterated its fiscal year 2025 non-GAAP EPS guidance of $3.45 to $3.75, implying "H1 EPS represents just 43% of annual EPS, a 10-year low, pointing to a steep and ambitious profitability ramp in H2," according to the note.

The investment firm said HP management expects stronger PC growth in the second half and planned cost cuts to drive H2 profits.

"All-in, we fully believe these factors have the potential to drive the H2 profitability ramp management has guided to, but it's an ambitious outlook this early in the year, especially with the myriad uncertainties present in the market today," Morgan Stanley said.

Morgan Stanley lowered its price target for HP's stock to $35 from $36, while reiterating an equal-weight rating.

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