- Credit Suisse analyst Shannon Cross downgrades HP Inc (NYSE:HPQ) from Outperform to Neutral with a $33 price target.
- Cross believes revenue and margins are challenged near term by weakening consumer sentiment, accounting for ~50% of PC revenue.
- She also expects pressure on ASPs due to lower demand and better supply, giving back a portion of the margin expansion that began in 2019.
- She predicts an impact from slower enterprise demand near term for PCs and printing as IT budgets prioritize hybrid cloud, security, and software solutions.
- She also emphasizes macroeconomic uncertainty, impacting buying decisions for 3D printing and commercial print.
- Citigroup analyst Jim Suva maintains a Neutral on HP and cut the price target from $33 to $31.
- He will hear from PC and enterprise infrastructure vendors in the next two weeks.
- The weakening environment in PC, smartphone, and printer device end demand amidst macroeconomic regional and inflationary concerns in recent results will likely remain critical areas of focus.
- Enterprise infrastructure demand remains an area of relative strength (Lenovo Group Ltd (OTC: LNVGY)), given high backlog levels.
- But recent mixed comments from Cisco Systems, Inc (NASDAQ:CSCO) on weakening order growth and Advanced Micro Devices, Inc (NASDAQ:AMD) and Dell Technologies Inc (NYSE:DELL) last quarter regarding order strength and enterprise turning more cautious are notable.
- He believes macro concerns could significantly impact infrastructure demand in the quarters ahead.
- Backlogs and order visibility will be areas of focus and cash generation/capital returns.
- He cut estimates on HPQ and Dell based on weakening PC conditions.
- Price Action: HPQ shares traded lower by 0.31% at $29.34 on the last check Friday.
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