HP Inc. (HPQ) Shares Drop 5.27% on Analyst Downgrade, Weak Earnings Outlook

HP Inc.'s shares (HPQ) fell 5.27% on Friday, marking a two-day decline of 5.48%. The stock hit a level not seen since August 2025, with an intraday drop of 5.64%, signaling renewed investor caution amid evolving market dynamics.

A downgrade from a major analyst firm to "In Line" from "Outperform" highlighted concerns over the sustainability of recent PC demand. The firm noted that current strength may be driven by short-term factors like tariff anticipation, raising doubts about long-term growth. Persistent challenges in HP’s printing division, including stagnant margins and competitive pressures, further weigh on sentiment.

Insider selling by major shareholders, including a significant reduction in Berkshire Hathaway’s stake, underscored waning confidence. Institutional investors also trimmed positions, amplifying downward pressure on the stock. These moves are interpreted as signals of caution, particularly given the broader macroeconomic headwinds and HP’s earnings outlook.

Recent earnings guidance revealed weaker-than-expected demand across PC and printer segments. Management acknowledged slower performance, with analysts projecting a double-digit decline in FY2023 earnings per share. The printing business faces ongoing margin compression, while the enterprise division struggles to gain traction in cloud and AI markets.

Valuation metrics highlight a discount to peers, with a forward P/E ratio of 8.31 versus a sector average of 12.74. While this suggests undervaluation, growth expectations remain muted. Competitive pressures from Dell and others, coupled with rising R&D costs, complicate HP’s path to differentiation in a saturated market.

Despite these challenges, some analysts view the stock as a potential long-term opportunity, citing a strong balance sheet and dividend yield. However, risks persist, including the likelihood of declining PC demand, margin pressures in the printing division, and continued skepticism from institutional investors. Near-term stabilization will depend on HP’s ability to address operational inefficiencies and demonstrate progress in high-growth areas.