HP ( NYSE: HPQ ) shares rose nearly 3% in premarket trading on Wednesday after the PC maker reported disappointing first-quarter results, but maintained its full-year earnings and free cash flow guidance, leaving some on Wall Street to see the light at the end of the tunnel.
Citi analyst Jim Suva, who has a neutral rating and per-share price target of $31 on HP ( HPQ ) shares, said he was "impressed" with the results in light of the dour PC trends in the first-quarter, following a difficult 2022.
"The company reiterated its full year [fiscal 2023 earnings per share] and cash flow expectations which is a positive in this environment of PC demand softness and macro recession concerns," Suva wrote in a note to clients.
HP ( HPQ ) said that it believes that channel inventory for the PC market will reach equilibrium in May or June, which Suva said was "fair." And with the company continuing to make progress in its subscription model, Suva added there could be a "strong" market for subscriptions for other hardware products.
Dell Technologies ( DELL ), which competes with HP in the PC space, saw its shares rise fractionally in premarket trading.
Wells Fargo analyst Aaron Rakers, who has an underweight rating on HP ( HPQ ), slightly lowered his fiscal 2023 and fiscal 2024 estimates after the results, but noted that the company is expecting a return to "pre-COVID seasonality" into the second-half of the year for the PC market.
Rakers now expects HP ( HPQ ) to generate $54.2B and $57.1B in revenue in fiscal 2023 and 2024, down from previous estimates of $57.8B and $58.9B, respectively.
"While normalizing PC channel inventory exiting [the second-quarter] should prove positive, we're cautious on recovery to pre-COVID seasonality into [the second-half of 2023]," Rakers wrote.
Bernstein analyst Toni Sacconaghi, who has a market perform and $29 per-share price target on HP ( HPQ ) said the first-quarter results were "okay," but with the reaffirmation of the full-year earnings estimate, he was raising his earnings estimates "modestly."
"HP's reaffirmation of its EPS guidance is predicated largely on improving margins in PCs throughout the year and printing margins remaining at historical highs, neither of which we believe is a slam dunk," Sacconaghi wrote. "We note that while revenues in [fiscal 2023] are likely to be below pre-pandemic levels, operating margins are expected to be well above, highlighting our concern."
Earlier this month, investment firm Morgan Stanley lowered its estimates for the PC market and its impact on HP ( HPQ ), but added that a "bottom" is starting to occur .
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HP rises as Wall Street sees light at end of the PC tunnel