As the PC Market Recovers In The Second Half, JPMorgan Upgrades This Tech Stock

The analysts at JPMorgan say that HP is on the verge of increasing its revenue and profit this year as the PC industry appears to be on the verge of picking up again. 

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According to analysts at Samik Chatterjee, HP shares have been upgraded from neutral to overweight. Moreover, he raised his year-end price target for the stock from $30 to $35, which implies a 17% increase over Friday's closing price. 

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According to Chatterjee, the company is hopeful that it will be able to turn around the headwinds that have been plaguing the PC end-market for the past few years. 

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"In line with our view of a 2H recovery underlying our PC model, the latest data points on PC shipments strengthen our belief that the PC segment will achieve a 21% H/H increase in units in 2H23 (albeit off a low base), which should allow the PC segment to prosper in the future. As a result of leveraging a leaner cost structure, as a result of the cost actions taken, Chatterjee continued to expect a robust ramp in revenue and an even stronger ramp in profits.” 

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Moreover, the analyst anticipates HP's printer business to have “resilient” revenue and margins, predicting that “the supply constraints impacting printer supply continue, resulting in robust margins.” HPQ should be able to offset some of the downward pressures from easing supply by improving structural margins in the printer segment, he said. 

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Because Chatterjee expects a stronger recovery in HPQ's personal system segment, his overall projections are still higher, even though he lowered his margin estimates for the printer segment due to improved supply. 

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Despite HP's long-term challenges in its printer business, the analyst still sees growth in the industry in the near future. 

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The long-term outlook for HPQ suggests that by the end of the cycle, it will be more challenging for HPQ's position in a secularly declining Print business compared to Dell's positioning in Servers and Storage and that the valuation for HPQ is less attractive at 8.0x 2024E EPS (compared to Dell at 6.7x)", said Chatterjee. 

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During the first hour of trading on Monday, the PC company's stock jumped 2.35%, its third consecutive day of gains, following a rally in the tech sector. Shares of the company rose almost 11% in 2023 after falling almost 29% in 2022.

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