HPQ: Memory Supercycle And Print Weakness Will Shape Balanced Future Returns

Analysts have trimmed their average price target on HP Inc. by about $2 to the mid $20s, as rising memory costs, a weaker printing outlook, and the resulting $1B cost restructuring plan temper the benefit of slightly better expected revenue growth and broadly stable margins.

Analyst Commentary

Street research on HP highlights a divided view, with most recent moves skewing cautious as analysts recalibrate earnings models for higher memory costs and a weaker print segment. While headline revenue expectations have edged up, the consensus is that these positives are being offset by structural and cyclical headwinds that constrain upside for both earnings and the multiple investors are willing to pay.

Bullish Takeaways

• Bullish analysts see HP's $1B restructuring plan as a proactive step that can preserve margins and support earnings power once memory prices normalize.
• Recent results underscored relative strength in the personal systems business, which supports the view that HP can still deliver modest top line growth even as printing lags.
• Some investors view the pullback in price targets, now clustered in the low to mid $20s, as partially de-risking the story and limiting further valuation downside if execution on cost savings is credible.
• Stable or slightly better revenue guidance versus prior expectations signals that demand is not collapsing, underpinning a case for HP as a cash generative, lower growth compounder rather than a structurally impaired asset.

Bearish Takeaways

• Bearish analysts emphasize the memory pricing "supercycle," which is driving inflated input costs and compressing gross margins, leading directly to cuts in EPS estimates and price targets.
• The persistent weakness in printing, a historically high margin business, is seen as a structural drag that limits HP's ability to re-rate and may warrant a lower valuation multiple.
• Several models have been revised lower on expectations of negative earnings revisions into 2026, with the combination of higher component costs and tepid non artificial intelligence hardware demand weighing on growth.
• The shift of at least one major house to an Underweight stance signals growing concern that multiple compression could continue as the market prices in a tougher margin environment and slower secular growth.

What's in the News

• HP reaffirmed its shareholder return focus, repurchasing 18.3 million shares for $500 million in the latest tranche, bringing total buybacks under its long running program to nearly 734 million shares, or about 60% of shares outstanding, for $19.2 billion.
• The company issued fiscal 2026 guidance calling for GAAP diluted EPS of $0.58 to $0.66 in the first quarter and $2.47 to $2.77 for the full year, framing investor expectations around a moderated but stable earnings trajectory.
• HP's board declared a quarterly cash dividend of $0.30 per share, the first dividend of fiscal 2026, underscoring management's commitment to ongoing capital returns.
• HP announced multiple strategic partnerships, including collaborations with Xsolla to expand its Gaming Garage learning platform globally and with Aceso Interactive to integrate HP | Poly video solutions into patient care, highlighting efforts to deepen its footprint in gaming education and healthcare collaboration tools.
• The company resolved several Wi Fi 6 patent disputes by joining the Sisvel Wi Fi 6 patent pool, gaining access to roughly 2,000 patents and eliminating ongoing litigation exposure from licensors including Huawei and Philips.

Valuation Changes

• Fair Value: edged down slightly from approximately $25.93 to about $25.88 per share, reflecting a marginal reduction in intrinsic value assumptions.
• Discount Rate: decreased modestly from roughly 9.34% to about 9.30%, implying a slightly lower required return and a marginally reduced perception of risk.
• Revenue Growth: increased slightly from around 1.50% to about 1.61%, signaling a small upward revision to long term top line growth expectations.
• Net Profit Margin: dipped marginally from approximately 4.92% to about 4.91%, indicating a very small downgrade to long run profitability assumptions.
• Future P/E: eased slightly from about 11.17x to roughly 11.13x, suggesting a minor contraction in the valuation multiple applied to forward earnings.