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HP (HPQ - Free Report) is a Zacks Rank #5 (Strong Sell) that provides personal computing and other access devices, imaging and printing products, and related technologies, solutions, and services.
The stock is trading near 2022 lows after a disappointing earnings report led analysts to slash estimates. Investors will be attracted to the dividend and valuation, but might want to stay away for now.
About the Company
HP is headquartered in Palo Alto, CA. The company founded in 1939 and was formerly known as Hewlett-Packard, until it changed its name to HP in 2015.
HP employs 51,000 people and operates through three segments: Personal Systems, Printing, and Corporate Investments.
HP is valued at $25 billion and has a Forward PE of 6. The company holds a Zacks Style Scores of “B” in Value, but “D” in Growth. The stock does have a nice dividend paying 4% at current trading levels.
Q3 Earnings
When it comes to earnings, the company does very well beating expectations. HP has not missed in over five years, but when they posted Q3 earnings the numbers came in as expected.
Revenues missed by $800M and the company cut their outlook.
HP guided Q4 in a range to $0.79-0.89m significantly lower than the $1.04 expected. The company also cut FY EPS and FCF. Operating margins were down year over year, personal systems revenue was down 3% y/y and printing revenues were down 6% y/y.
Recently, IT Gartner reported Q3 worldwide PC shipments were down 19.5% year over year. That kind of news is not what investors want to hear. Especially on top of the fact that HPQ estimates have been falling over the last two months
Estimates
Analysts look pretty bearish on future earnings for HP. Since Q3 earnings, estimates have fallen across all time frames.
For the current quarter, estimates have dropped from $1.05 to $0.84 over the last 60 days, or 20%. For next quarter, the numbers have fallen 19% over the same time frame.
Estimates are not looking great over the long-term either. For the current year, estimates have fallen 5% over the last 60 days. For next year, they have been slashed 14% over that same time frame.
Technical Take
HPQ is trading at 2022 lows, so there is not much to like about the chart. The 61.8% retracement drawn from COVID lows to 2022 highs is $23.80, so we could see some technical buying come in there.
If that were to fail, then investors are looking at the $20 level as the next area of support, followed by the COVID lows in the $15 area.
For bulls looking for a turnaround, they should eye the 21-day moving average at $26 as the first step. Then a move above the 50-day MA at $29.50 could signal some improvement. Remember, these levels will change and drift lower as price continues to trade lower.
In Summary
With inventories in the computing space becoming a larger issue, HP might continue to struggle near-term. While the dividend and valuation are attractive, investors need to understand they will likely become much more attractive when the stock drops more.
For those interested in the sector a better option might be Apple (AAPL - Free Report) . The stock is a Zacks Rank #3 (Hold) and is best in breed when it comes to tech.
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Bear of the Day: HP (HPQ)
HP (HPQ - Free Report) is a Zacks Rank #5 (Strong Sell) that provides personal computing and other access devices, imaging and printing products, and related technologies, solutions, and services.
The stock is trading near 2022 lows after a disappointing earnings report led analysts to slash estimates. Investors will be attracted to the dividend and valuation, but might want to stay away for now.
About the Company
HP is headquartered in Palo Alto, CA. The company founded in 1939 and was formerly known as Hewlett-Packard, until it changed its name to HP in 2015.
HP employs 51,000 people and operates through three segments: Personal Systems, Printing, and Corporate Investments.
HP is valued at $25 billion and has a Forward PE of 6. The company holds a Zacks Style Scores of “B” in Value, but “D” in Growth. The stock does have a nice dividend paying 4% at current trading levels.
Q3 Earnings
When it comes to earnings, the company does very well beating expectations. HP has not missed in over five years, but when they posted Q3 earnings the numbers came in as expected.
Revenues missed by $800M and the company cut their outlook.
HP guided Q4 in a range to $0.79-0.89m significantly lower than the $1.04 expected. The company also cut FY EPS and FCF. Operating margins were down year over year, personal systems revenue was down 3% y/y and printing revenues were down 6% y/y.
Recently, IT Gartner reported Q3 worldwide PC shipments were down 19.5% year over year. That kind of news is not what investors want to hear. Especially on top of the fact that HPQ estimates have been falling over the last two months
Estimates
Analysts look pretty bearish on future earnings for HP. Since Q3 earnings, estimates have fallen across all time frames.
For the current quarter, estimates have dropped from $1.05 to $0.84 over the last 60 days, or 20%. For next quarter, the numbers have fallen 19% over the same time frame.
Estimates are not looking great over the long-term either. For the current year, estimates have fallen 5% over the last 60 days. For next year, they have been slashed 14% over that same time frame.
Technical Take
HPQ is trading at 2022 lows, so there is not much to like about the chart. The 61.8% retracement drawn from COVID lows to 2022 highs is $23.80, so we could see some technical buying come in there.
If that were to fail, then investors are looking at the $20 level as the next area of support, followed by the COVID lows in the $15 area.
For bulls looking for a turnaround, they should eye the 21-day moving average at $26 as the first step. Then a move above the 50-day MA at $29.50 could signal some improvement. Remember, these levels will change and drift lower as price continues to trade lower.
In Summary
With inventories in the computing space becoming a larger issue, HP might continue to struggle near-term. While the dividend and valuation are attractive, investors need to understand they will likely become much more attractive when the stock drops more.
For those interested in the sector a better option might be Apple (AAPL - Free Report) . The stock is a Zacks Rank #3 (Hold) and is best in breed when it comes to tech.