Is HP a Discounted Tech Powerhouse With a Turnaround Playbook?

In the ever-shifting landscape of technology, identifying undervalued giants requires a blend of rigorous financial analysis and strategic foresight. Hewlett-Packard (HP), a name synonymous with computing since its founding in 1939, now finds itself at a crossroads. After years of stagnation and declining relevance in the print market, the company has embarked on an aggressive AI-driven restructuring. For value investors, the question is whether HP's current valuation-a forward P/E of 7.45 to 8.11 according to Intellectia-reflects a compelling opportunity or a cautionary tale. The evidence suggests the former.

A DCF-Driven Case for Undervaluation

Discounted cash flow (DCF) models, a cornerstone of value investing, consistently point to a significant discount in HP's stock. Recent analyses place its intrinsic value between $38 and $50.81 per share, a range implying a 35% to 46% undervaluation relative to its current price of approximately $25.21 according to Simply Wall St. For instance, Alpha Spread's DCF model estimates an intrinsic value of $40.09, while Simply Wall St's proprietary analysis suggests a fair value of $44.32. These figures are not outliers but part of a broader consensus across methodologies. The disparity between HP's current price and its projected cash-generating capabilities underscores a margin of safety rarely seen in the tech sector.

The P/E Puzzle: A Mispricing or a Miscalculation?

HP's valuation gap extends beyond DCF. Its forward P/E ratio of 7.45 according to Full Ratio is starkly lower than the 23.3x to 27x fair P/E ratio implied by earnings growth, profitability, and risk-adjusted benchmarks according to Simply Wall St. This 300%+ gap is even more pronounced when compared to the Technology sector's average P/E of 29.83 according to Intellectia. Such a discrepancy suggests the market is underestimating HP's long-term potential. While the print segment's decline has historically dragged on its multiples, the company's strategic pivot toward higher-margin services and AI-driven innovation could justify a re-rating.

Free Cash Flow and the AI-Driven Turnaround

HP's financials provide further ammunition for the value case. In fiscal 2025, the company generated $2.9 billion in free cash flow (FCF), with $1.5 billion in Q4 alone according to HP's earnings report. This liquidity, coupled with a disciplined capital return program-$1.9 billion returned to shareholders in 2025 according to The Fool-highlights its ability to balance reinvestment and shareholder value.

The AI-driven restructuring, announced in late 2025, is the linchpin of HP's turnaround. The company plans to cut 4,000 to 6,000 jobs globally, aiming for $1 billion in annual cost savings by 2028. These savings will fund AI initiatives, including AI-enabled PCs, which already account for 30% of shipments according to Economic Times. CEO Enrique Lores has emphasized AI's role in redefining productivity tools, a vision aligned with rising demand for AI infrastructure. The restructuring, though costly $650 million in charges, is a calculated bet to position HP as a leader in the next computing era.

Risks and Realities

No investment is without risk. HP's print business, which still contributes a significant portion of revenue, faces structural decline as digital adoption accelerates. Additionally, margin pressures from rising memory chip costs could strain profitability according to HRG Grapevine. The success of its AI strategy hinges on execution: can HP innovate quickly enough to compete with rivals like Dell or Lenovo? And will the workforce reductions, while necessary, alienate key talent or disrupt operations?

Yet these risks are not insurmountable. HP's cost discipline and $3.01 billion in FCF provide a buffer against short-term volatility. Moreover, its strategic focus on AI-a sector expected to grow exponentially-offers a path to long-term relevance.

A Compelling Risk-Reward for Patient Investors

For long-term investors, HP's current valuation represents a rare intersection of undervaluation and strategic momentum. The DCF models, the P/E gap, and the AI-driven restructuring all point to a company poised for a re-rating. While the print business may never regain its former glory, HP's pivot to AI and services offers a credible path to sustainable growth.

In a market that often overreacts to short-term challenges, HP's discounted price invites a contrarian bet. As the company executes its turnaround, the rewards for patient investors could be substantial.