We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why HP Inc. (HPQ) Deserves a Place in Investors' Portfolio?
Read MoreHide Full Article
Stocks showing momentum and having enough prospects are the ones that investors like to add to their portfolio. Below we have evaluated one such technology company – HP Inc. (HPQ - Free Report) – which has gained solid momentum in the year, so far, and seems to have potential for further growth.
Notably, HP is one of the two publicly traded entities that were formed after the Nov 2015 split of Hewlett-Packard Company. The other company formed in the process was Hewlett Packard Enterprise Company (HPE - Free Report) . HP focuses on PC and printing products and services.
The stock has been clocking solid returns since the beginning of 2016 and has gained approximately 27.6%, outperforming the Zacks categorized Computer-Mini Computers industry return of 11.8%.
Let’s look at the reasons behind HP’s solid momentum.
What’s Driving the Stock?
We believe that the parent company’s (Hewlett-Packard Company) decision to split the business has been a boon for HP. This is because a split allows a customized approach to two different businesses, which may not have been possible while they operated as a single entity.
Since its split, HP has been restructuring its business to reap long-term benefits. The company has divested its content management software tools and Customer Communications Management (CCM) assets to Open Text Corporation, in a move which will facilitate the business realignment and enable it to focus better on the PC and printing businesses. Apart from this, it will also facilitate cost reduction and enhance productivity, thus helping the company boost profitability.
Furthermore, post the split, HP has been focused on product innovation and differentiation to maintain its leading position in the space. Keeping with this, during fiscal 2016, the company launched EliteBook Folio, the world's thinnest and lightest business class notebook.
Meanwhile, the company is also undertaking pricing actions, and marketing and sales activities in a bid to drive demand, in turn, giving some price stability to the market. Moreover, HP is trying to shift its product mix to the high end and move away from the low-and negative-margin businesses.
The impact of these efforts was reflected clearly in the company’s last two earnings releases, wherein the Personal Systems segment witnessed stabilization to a certain extent, and even recorded a slight year-over-year improvement after several quarters.
The company’s efforts to revamp the printing business have also been commendable. Note that HP recently signed a deal to acquire Samsung Electronics’ printer business, for a purchase price of $1.05 billion.
The acquisition is a strategic fit for HP, as it will be able to expand the company’s printing business, with the addition of 6,500-plus printing patents owned by Samsung. The move will provide support to the development and manufacturing of HP printers, going forward.
In addition, the company is now focusing on enhancing its 3D printing business capabilities, in an effort to revive the tumbling sales. It should be noted that even though HP has been operating in this space for almost five years now, it still lags behind 3D Systems Corporation (DDD - Free Report) and Stratasys Ltd. (SSYS - Free Report) .
Thus, in order to fortify its presence in the market, HP recently unveiled its Jet Fusion 3D Printing Solution, with two models to choose from – 4200 and 3200. Unlike 3D Systems and Stratasys, which target all kinds of consumers, HP is emphasizing only on industrial markets because of their ability to afford a premium range of 3D printing solutions.
To satisfy customers in this space, HP inked collaborations with the likes of BMW, Nike and Autodesk, in order to develop more advanced 3D printing technologies for diverse industrial uses.
Bottom Line
HP’s efforts to turn around the business have been commendable. The company has adopted a strategy of focusing on product innovations and differentiation as well as on enhancing the printing business’ capabilities, which will help stabilize the top line.
Furthermore, looking at the data compiled by two independent research firms – Gartner and International Data Corporation – we believe that the downtrend in the PC shipments moderated in third-quarter 2016, compared with the previous quarters.
Notably, for HP, this was the second consecutive quarter of year-over-year shipment growth following five back-to-back quarters of underperformance. The company witnessed a 2.3% increase in PC shipments. We believe that the spin-off from Hewlett-Packard Company and restructuring initiatives, such as focus on product innovations, pricing, marketing and sales activities, divestment of non-core assets, and job cuts to lower costs, are paying off, at last.
On valuation perspective too, the stock looks attractive. The company currently trades at trailing 12-month (TTM) P/E multiple of 9.4x, a huge discount to the Zacks categorized Computer-Mini Computers industry’s average P/E multiple of 13.6x. The stock’s forward P/E of 9.4x is also lower than the Computer-Mini industry’s average P/E multiple of 13.5x.
The ratio, which is obtained by dividing a stock’s current market price with its historical or estimated earnings, measures how much an investor needs to shell out per dollar of earnings. Therefore, lower the P/E of a stock, the better for a value investor.
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why HP Inc. (HPQ) Deserves a Place in Investors' Portfolio?
Stocks showing momentum and having enough prospects are the ones that investors like to add to their portfolio. Below we have evaluated one such technology company – HP Inc. (HPQ - Free Report) – which has gained solid momentum in the year, so far, and seems to have potential for further growth.
Notably, HP is one of the two publicly traded entities that were formed after the Nov 2015 split of Hewlett-Packard Company. The other company formed in the process was Hewlett Packard Enterprise Company (HPE - Free Report) . HP focuses on PC and printing products and services.
The stock has been clocking solid returns since the beginning of 2016 and has gained approximately 27.6%, outperforming the Zacks categorized Computer-Mini Computers industry return of 11.8%.
Let’s look at the reasons behind HP’s solid momentum.
What’s Driving the Stock?
We believe that the parent company’s (Hewlett-Packard Company) decision to split the business has been a boon for HP. This is because a split allows a customized approach to two different businesses, which may not have been possible while they operated as a single entity.
Since its split, HP has been restructuring its business to reap long-term benefits. The company has divested its content management software tools and Customer Communications Management (CCM) assets to Open Text Corporation, in a move which will facilitate the business realignment and enable it to focus better on the PC and printing businesses. Apart from this, it will also facilitate cost reduction and enhance productivity, thus helping the company boost profitability.
Furthermore, post the split, HP has been focused on product innovation and differentiation to maintain its leading position in the space. Keeping with this, during fiscal 2016, the company launched EliteBook Folio, the world's thinnest and lightest business class notebook.
Meanwhile, the company is also undertaking pricing actions, and marketing and sales activities in a bid to drive demand, in turn, giving some price stability to the market. Moreover, HP is trying to shift its product mix to the high end and move away from the low-and negative-margin businesses.
The impact of these efforts was reflected clearly in the company’s last two earnings releases, wherein the Personal Systems segment witnessed stabilization to a certain extent, and even recorded a slight year-over-year improvement after several quarters.
The company’s efforts to revamp the printing business have also been commendable. Note that HP recently signed a deal to acquire Samsung Electronics’ printer business, for a purchase price of $1.05 billion.
The acquisition is a strategic fit for HP, as it will be able to expand the company’s printing business, with the addition of 6,500-plus printing patents owned by Samsung. The move will provide support to the development and manufacturing of HP printers, going forward.
In addition, the company is now focusing on enhancing its 3D printing business capabilities, in an effort to revive the tumbling sales. It should be noted that even though HP has been operating in this space for almost five years now, it still lags behind 3D Systems Corporation (DDD - Free Report) and Stratasys Ltd. (SSYS - Free Report) .
Thus, in order to fortify its presence in the market, HP recently unveiled its Jet Fusion 3D Printing Solution, with two models to choose from – 4200 and 3200. Unlike 3D Systems and Stratasys, which target all kinds of consumers, HP is emphasizing only on industrial markets because of their ability to afford a premium range of 3D printing solutions.
To satisfy customers in this space, HP inked collaborations with the likes of BMW, Nike and Autodesk, in order to develop more advanced 3D printing technologies for diverse industrial uses.
Bottom Line
HP’s efforts to turn around the business have been commendable. The company has adopted a strategy of focusing on product innovations and differentiation as well as on enhancing the printing business’ capabilities, which will help stabilize the top line.
Furthermore, looking at the data compiled by two independent research firms – Gartner and International Data Corporation – we believe that the downtrend in the PC shipments moderated in third-quarter 2016, compared with the previous quarters.
Notably, for HP, this was the second consecutive quarter of year-over-year shipment growth following five back-to-back quarters of underperformance. The company witnessed a 2.3% increase in PC shipments. We believe that the spin-off from Hewlett-Packard Company and restructuring initiatives, such as focus on product innovations, pricing, marketing and sales activities, divestment of non-core assets, and job cuts to lower costs, are paying off, at last.
On valuation perspective too, the stock looks attractive. The company currently trades at trailing 12-month (TTM) P/E multiple of 9.4x, a huge discount to the Zacks categorized Computer-Mini Computers industry’s average P/E multiple of 13.6x. The stock’s forward P/E of 9.4x is also lower than the Computer-Mini industry’s average P/E multiple of 13.5x.
The ratio, which is obtained by dividing a stock’s current market price with its historical or estimated earnings, measures how much an investor needs to shell out per dollar of earnings. Therefore, lower the P/E of a stock, the better for a value investor.
Hence, we believe there is still much momentum left in this Zacks Rank #3 (Hold) stock, which is quite evident from its VGM Style Score of “A”. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>