In a blow to investors, shares of HP tumbled over 8% on Wednesday morning following the release of their fiscal third-quarter earnings. The printer and PC maker reported revenue of $13.2 billion, falling short of the $13.37 billion expected by analysts. While adjusted earnings per share met expectations at 86 cents, weak guidance from the company added to concerns. HP attributed the underwhelming performance to the failure of PC pricing to improve as anticipated.
Market analysts at Bernstein expressed disappointment with HP’s quarter but remained optimistic about the future of PC revenues. They believe that despite the current setback, improvements are likely in the coming months. However, the analysts also highlighted concerns regarding HP’s printing business, citing potential weaknesses in printer shipments and the overall growth prospects of the segment. They wrote in a note that HPQ’s margins remain above pre-pandemic levels, but the structural health of the printing business raises doubts about its ability to expand over time.
Credit Suisse analysts echoed these concerns, emphasizing that HP’s print segment poses their biggest worry. They cited discussions about long-term weakness as well as the possible necessity for more aggressive pricing strategies. These analysts lowered their fiscal fourth-quarter and fiscal full-year estimates for the company. Deutsche Bank analysts also adjusted their outlook for HP, reducing their price target from $32 to $30. They attributed their decision to weaker demand in China, which has impeded recovery, and a pessimistic long-term outlook for HP’s print business.
Despite lowering their price target, Deutsche Bank analysts pointed out positive aspects of HP’s report. They praised the company for generating solid operating margins in both segments, particularly given the challenging demand environment. The analysts also took note of HP’s plan to restart share repurchases, which could help offset dilution in the near term. While recognizing the obstacles faced by HP, they emphasized their continued admiration for the company’s ability to achieve strong financial performance.
Moving forward, HP faces the task of addressing the disappointing results and concerns surrounding its print business. The company must develop strategies to stimulate PC pricing improvements and increase printer shipments to foster growth. HP’s ability to navigate these challenges and adapt to the evolving market landscape will be crucial in rebuilding investor confidence. Additionally, HP’s commitment to generating solid operating margins and exploring new avenues for growth will play a vital role in determining its long-term success.
HP’s underwhelming Q3 earnings have triggered a substantial drop in share value and raised concerns among investors. While market analysts express caution regarding the future of HP’s printing business, they remain hopeful about the potential for improvement in PC revenues. HP must address these concerns head-on, strategically navigate market challenges, and focus on innovative solutions to regain momentum and drive long-term growth. Only time will tell if the company can rise above the obstacles and deliver results that satisfy both Wall Street and its shareholders.