HP Inc (NYSE:HPQ)’s second-quarter results, reported on Tuesday, may reflect the worst, with limited downside in the near term, UBS said in a note on Wednesday as it maintained a ‘Neutral’ rating on the stock and raised its price target by a dollar to $31.
But while a roughly 29% decline in revenue from its Personal Systems Group (PSG) division should be the cycle trough, analysts at UBS said that is unlikely to sway the debate as a sequential recovery is already expected by the market.
“That said, management’s comment that PC channel inventory should return to normal during F3Q and grow high-single digits QoQ is an incremental positive,” the analysts wrote.
“Furthermore, given channel normalization and easing comps, we expect F4Q PSG revenue to increase mid-single digits QoQ, resulting in PSG revenue down 19% in FY23.”
While the company did not provide a full-year 2024 framework, the UBS analysts said they believe PSG revenue is likely to turn positive in 1Q 2024 given this year’s low base.
The analysts have lowered their revenue estimates for HP for 2023 and 2024 by roughly 2% but have raised their earnings per share guidance for 2023 due to cost savings at the company.
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