2023-10-23 10:39:08 ET
HP ( NYSE: HPQ ) had a tumultuous period after it released its quarterly results in late August, as the stock fell 6.6% after the tech heavyweight slashed its annual cash flow and profit outlook . However, the stock has pared some of its losses recently, bolstered by new industry data pointing to an expected recovery in upcoming months.
Shares of Palo Alto, California-based company have lost 15.7% since reporting third-quarter results, while the broader S&P 500 ( SP500 ) is down 6% and the S&P 500 Technology Hardware and Equipment index (SP500-4520) is down 7.7%. The below chart displays HP's performance for the period 30th August, 2023 to 21st October, 2023.
In the past three months, analysts have revised quarterly earnings per shares estimates downward 12 times and compared to just one upward revision. Additionally, revenue estimates have been cut 11 times.
HP’s Quant rating has remained unchanged at “Hold” since August earnings, however, its Quant score has changed to 3.08 from 3.00. According to quant model, HP indicates reasonable valuation and profitability, though it lags with growth, momentum and revisions.
Adding to the September gloom was the dumping of about 23.1M shares in a series of transactions by Warren Buffett’s Berkshire Hathaway ( BRK.A ) ( BRK.B ). The conglomerate now holds roughly 97.9M shares, down from about 109.8M shares valued at $4.2B in April 2022. Average daily volume is higher by 46% to 9.5M shares compared to the average daily volume of 6.5M shares per day from the start of the year until third-quarter earnings.
However, HP shares have regained some ground this month as research firms like Gartner have pointed out evidence suggesting that the PC decline has bottomed out and the worst could be over by the end of 2023.
Additionally, preliminary data from IDC noted that HP's third-quarter PC shipments rose 6.4% even as all of its peers saw declines, with Apple and Dell recording a 23% and 14% fall, respectively.
"The PC industry is on a slow path to recovery as a device refresh cycle and end of support for Windows 10 will help drive sales in the second half of 2024 and beyond,” said Jitesh Ubrani, a research manager at IDC.
Mirroring the positive sentiment, HP during its Investor Day , raised its annual dividend by 5% and forecasted free cash flow of $3.1B - $3.6B for fiscal year 2024 while committing to return 100% of free cash flow to shareholders.
"The company's emphasis on AI-enabled PCs and its expansion in the gaming PC market are encouraging signs for future growth,” said SA contributor Normad Capital .
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