HP Inc. (HPQ) is a leading global provider of personal computing, imaging and printing products and related technologies, solutions and services, asserts Hilary Kramer, editor of the industry-leading Value Authority.
The company is one of two that was formed from the split of the former Hewlett-Packard in 2015. The other one is Hewlett Packard Enterprises (HPE), which sells servers and storage that enable large enterprises to engage in networking and cloud computing.
HPQ’s Personal Systems offers commercial and consumer desktop and notebook PCs, workstations, thin clients, retail POS systems, displays and other related accessories, software, support and services.
Printing provides consumer and commercial printer hardware, supplies, solutions and services, as well as scanning devices. Printing is also focused on imaging solutions in the commercial and industrial markets.
COVID-19 began impacting results in the company’s fiscal second quarter that ended in April. However, a favorable shift due to the fact that notebooks have continued to be strong, along with careful cost measures, is allowing profitability to hold up relatively well.
With the current fiscal year halfway over, estimates for a 7.5% revenue decline to $54.3 billion and EPS decline to $2.10 from $2.24 a share look realistic.
At less than 9X this year’s earnings estimates and with earnings likely to rebound as the economy recovers, the stock is very cheap when one considers the company’s recent growth and the very low interest rate environment. Insiders think so as well, with director Robert Bennett recently buying $748,000 in stock.
In addition, Xerox Inc. (XRX) recently offered to acquire HPQ for $24 a share, which the company declined. While Xerox has since withdrawn their offer, I believe that they could come back at some point.
If so, Xerox’s presence should place a “put” on the shares. This should limit any decline in HPQ’s share price should the market turn lower again.
With strong cash flows, businesses that are proving resilient and a very low valuation, HPQ should return to this year’s highs. Buy HPQ under $19. My target is $23. The 4.3% dividend yield will add to total returns.
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