Citi
upgraded
HPInc.
stock, signaling growing confidence in the outlook for sales of personal computers and free cash flow, following a similar move by BofA Securities over a month ago.
On Monday, analyst Asiya Merchant pushed her rating on the PC manufacturer (ticker: HPQ) to Buy from Neutral and lifted her target for the stock’s price to $33 from $31. The new target implies a potential gain of 16% from Friday’s closing price.
HP stock was 0.3% higher at $27.71 in early trading, while the
S&P 500
was 0.4% lower.
Merchant expects better demand for PCs, which would drive up revenue for this segment.
“Higher PC revenue growth rates have historically been correlated with higher free cash flow generation and higher shareholder returns,” Merchant wrote, referring to increases in buybacks and dividends.
Citi’s take comes after BofA Securities analyst Wamsi Mohan upgraded the stock to Buy from Underperform in early October, lifting BofA’s target for the stock price to $33 from $25. Mohan also cited better demand for PCs and growth in free cash flow as reasons for his upgrade.
The pandemic led to a surge in demand for PCs as people working from home bought desktops and notebooks, but demand faded as people returned to offices and schools. Last year, worldwide shipments fell by 16.5% from 2021.
Now, the latest commentary from Intel (INTC) and
Samsung Electronics
has suggested a recovery is underway. Last month, Samsung said demand for PC and mobile devices, such as phones, is likely to benefit in 2024 as customers seek to replace equipment they bought during the pandemic. Intel’s CEO Patrick Gelsinger had positive commentary on consumption as well.
HP reports fourth-quarter earnings on Nov. 21.
To be sure, not everyone is upbeat about HP stock. Warren Buffett’s Berkshire Hathaway reduced its holdings of the shares in September. It had accumulated the stake in early 2022.
Write to Karishma Vanjani at [email protected].
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