icon
icon
icon
icon
🏷️$300 Off
🏷️$300 Off

News /

Articles /

HPQ Stock Drops After Weak Q2 Outlook, Analysts Eye Second Half Recovery

Marcus LeeFriday, Feb 28, 2025 2:25 pm ET
4min read

HP Inc. (NYSE: HPQ) stock fell about 5% premarket on Friday after its fiscal first quarter 2025 results and a lower than expected second quarter EPS outlook, which saw mixed reactions from analysts. evercore maintained its Outperform rating and $40 price target, while morgan stanley took a more cautious stance, lowering its price target to $35 from $36 while maintaining an Equal-weight rating.

HP's weaker-than-expected Q2 EPS outlook was primarily driven by increased tariffs and supply chain diversification costs, as well as margin pressures and the need for a significant PC volume recovery. The company attributed the lower guidance to increased tariffs and the costs associated with diversifying its supply chain away from China. According to FactSet, hp anticipates adjusted earnings per share (EPS) for Q2 to range between $0.75 and $0.85, falling short of the anticipated $0.86 per share.

HP's print margins improved to 19.6% in the fourth quarter, exceeding internal and external forecasts. However, the company anticipates print operating margins will remain at the higher end of the 16% - 19% range in fiscal 2025. Meanwhile, PS margins are expected to climb to the upper half of 5% - 7%, aided by improved pricing strategies and volume leverage. Despite these improvements, margin pressures persist, and HP needs a significant recovery in PC volumes to meet its annual targets.

HP's strategy to reduce U.S. revenue exposure to China by the end of fiscal 2025 is aimed at mitigating the impact of tariffs and geopolitical risks on its supply chain and future growth. By diversifying its supply chain away from China, HP can better navigate potential tariff escalations and ensure smoother operations. This strategy is expected to position HP to better manage costs and adapt to a shifting global trade environment.

Analysts see strong PC demand and cost cuts as potential tailwinds, but with market uncertainties still looming, HP's ambitious second-half profitability forecast is under scrutiny. Evercore highlighted HP's growth in the Personal Systems (PS) segment, with commercial PC sales jumping 10% driven by Windows 11 refreshes and AI PC adoption. However, Morgan Stanley took a more cautious stance, noting that HP's Q2 EPS guidance came in $0.05 below expectations and that first-half EPS will only account for 43% of the annual total—a 10-year low—suggesting HP is betting on a steep profitability ramp in the back half of the year.

HPQ52-Week Low, 52-Week High...
52-Week Low(USD)
52-Week High(USD)
Date
52-Week High(USD)
52-Week Low(USD)
Interval Closing Price(USD)
27.4339.8020231229-2024123139.8027.4332.63
27.4339.802025022839.8027.43--
Name
HPHPQ
HPHPQ



In conclusion, HP's weaker-than-expected Q2 EPS outlook and mixed analyst reactions underscore the challenges the company faces in navigating increased tariffs, margin pressures, and market uncertainties. While HP's strategy to reduce U.S. revenue exposure to China and its growth in the Personal Systems segment offer reasons for optimism, the company must still prove its ability to execute on its ambitious second-half profitability forecast. Investors will closely monitor HP's progress in the coming quarters to assess the company's long-term prospects.
Comments

Add a public comment...
Post
User avatar and name identifying the post author
FTCommoner
02/28
$HPQ seems like the market is okay with the company buying back the entire stock at a price lower than 10 times the lowest earnings.
0
Reply
User avatar and name identifying the post author
CurlyDarkrai
03/01
@FTCommoner I had $HPQ once, sold too early. Regretted it when it rose. Now I'm just watching and hoping for a dip.
0
Reply
User avatar and name identifying the post author
stoked_7
03/01
@FTCommoner How long you planning to hold $HPQ? Curious if you're thinking short-term flip or long-term play.
0
Reply
Disclaimer: The news articles available on this platform are generated in whole or in part by artificial intelligence and may not have been reviewed or fact checked by human editors. While we make reasonable efforts to ensure the quality and accuracy of the content, we make no representations or warranties, express or implied, as to the truthfulness, reliability, completeness, or timeliness of any information provided. It is your sole responsibility to independently verify any facts, statements, or claims prior to acting upon them. Ainvest Fintech Inc expressly disclaims all liability for any loss, damage, or harm arising from the use of or reliance on AI-generated content, including but not limited to direct, indirect, incidental, or consequential damages.
You Can Understand News Better with AI.
Whats the News impact on stock market?
Its impact is
fork
logo
AInvest
Aime Coplilot
Invest Smarter With AI Power.
Open App