HP Stock Plunges 13%: Tech Titan Facing Headwinds?

HP Inc. (HPQ), a tech industry behemoth, has witnessed a staggering 13% decline in its stock price, raising concerns about its competitive edge. The recent earnings report, released on November 26, 2024, painted a mixed picture, with revenue growth but a substantial drop in EPS guidance for the upcoming fiscal year. This article delves into the reasons behind the stock plunge and explores whether HP is losing its edge in the tech landscape.

HP's Q4 2024 earnings revealed a 2% year-over-year revenue increase, driven by strong performances in both personal systems and print segments. However, the company's outlook for Q1 2025 and fiscal 2025 disappointed investors, with EPS guidance coming in at $0.70-$0.76 and $3.45-$3.75, respectively, missing analysts' estimates of $0.85 and $3.60. This revised guidance suggests a potential slowdown in growth and margin pressures, contributing to the stock's significant decline.

The company's restructuring efforts and cost-cutting measures have had mixed results. While HP returned nearly 100% of its free cash flow to shareholders in 2024, demonstrating a strong commitment to shareholder returns, the company's earnings and revenue growth have been negatively impacted by restructuring charges and lower margins. HP's print operating margin range is set at 16% to 19%, but the company has consistently achieved 19%, indicating potential profitability challenges.

HP's cost-cutting measures and restructuring efforts have also impacted its earnings and revenue growth. In Q4 2024, HP reported a 1.7% increase in revenue, driven by steady progress in Personal Systems and Print. However, GAAP net earnings fell 7% year-over-year, while non-GAAP net earnings and EPS remained flat. Despite the strong free cash flow and dividend increase, the company's restructuring efforts have not yet translated into significant earnings growth.



HP's strategic focus on AI and innovation has driven recent earnings and revenue growth. In Q4 2024, HP reported revenue growth of 2% YoY, with strong contributions from personal systems and print. Enhanced AI capabilities, such as those in the EliteBook X and OmniBook Ultra Flip, have propelled market share gains in high-value categories. Despite challenges like rising commodity costs and print market decline projections, HP's commitment to shareholder returns and growth initiatives bodes well for long-term success.

In conclusion, HP's 13% stock decline is concerning, but it's important to analyze the underlying factors. The company's recent revenue growth and innovation in AI-powered capabilities suggest it's not losing its edge. However, the revised guidance and missed revenue estimates indicate potential headwinds. As HP navigates these challenges, investors should closely monitor the company's progress in meeting its growth targets and maintaining market share.