HP Stock Drops 9% as Weak Q2 Guidance Raises Profitability Concerns

GuruFocus
28 Feb

HP Inc. (HPQ, Financial) is down 9.01% to $30.15 as of 9:41 AM ET following its fiscal Q1 2025 results and a weaker-than-expected Q2 earnings outlook, which has drawn mixed reactions from analysts.

Evercore remains bullish on HP, keeping an Outperform rating and a $40 price target, noting that the company maintained full-year guidance despite ongoing challenges. HP's Personal Systems (PS) segment grew 5%, with commercial PC sales jumping 10%, driven by Windows 11 refreshes and AI PC adoption. However, consumer PC revenue declined 7%, and printing revenue slipped 1%.

The firm also highlighted tariff-related headwinds from China, which HP has partially mitigated by stockpiling inventory and making supply chain adjustments. HP aims to reduce U.S. revenue exposure to China to just 10% by the end of fiscal 2025. Additionally, HP increased its Future Ready cost-saving plan by $300M, now expecting $1.9B in savings by year-end.

Morgan Stanley, however, took a more cautious stance, lowering its price target to $35 from $36 while maintaining an Equal-weight rating. Analyst Erik Woodring noted that HP's Q2 EPS guidance came in $0.05 below expectations. He also pointed out that first-half EPS will only account for 43% of the annual total—a 10-year low—suggesting HP is betting on a steep profitability ramp in the back half of the year.

Analysts see strong PC demand and cost cuts as potential tailwinds, but with market uncertainties still looming, HP's ambitious second-half profitability forecast is under scrutiny.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Most Discussed

  1. 1
     
     
     
     
  2. 2
     
     
     
     
  3. 3
     
     
     
     
  4. 4
     
     
     
     
  5. 5
     
     
     
     
  6. 6
     
     
     
     
  7. 7
     
     
     
     
  8. 8
     
     
     
     
  9. 9
     
     
     
     
  10. 10