Why did HP Inc rise 28% in the last three months?
HPQ's share price rally has come on the back of higher dividends as well as stronger shipments in the second quarter of 2020.
HP Inc’s stock hit a six-month high in August
HP Inc’s share price has rallied as much as 28% since the start of June 2020, with investors keeping bullish on the stock even amid concerns of a global recession.
On 11 August, the company’s share price was able to top the US$19 mark for the first time in six months.
Share price has declined slightly since then, and last traded for US$18.27 a share on Friday 21 August.
The stock’s steady rise in the last couple of months had coincided with HP Inc’s dividend announcement in late June, solid shipment growth in Q2 of 2020, as well as the US tech sector’s boom during this pandemic season.
On 24 June 2020, HP Inc’s board of directors declared a cash dividend of US$0.1762 per common share, 10% higher than the pay-out of US$0.16 in the same period a year ago. In the subsequent day, Dell shares surged 7.7%.
Additionally, while many small and medium businesses have been adversely impacted by Covid-19, US tech giants like HP Inc have reversely experienced a surge in demand for their products and services.
Research company Gartner also found in its second quarter survey that HP Inc was the world’s second largest PC vendor in Q2 2020, with 24.9% of total market share.
PC shipments also increased 17.1% year-on-year for HP Inc, the second highest on the list.
Feeling optimistic about HP Inc?
HPQ rated a ‘hold’ by Wall Street analysts
Across the board, HPQ currently has a consensus rating of ‘hold’ from 17 Wall Street brokers, based on Bloomberg data.
The stock has also received an average 12-month share price target of US$18.06 per share, according to the same poll.
This represents a small downside of 1.1% from the last traded price, indicating that the stock is currently trading above its fair market value.
In terms of specific price estimates, JP Morgan equity researchers have rated the HP Inc stock ‘neutral’ alongside a share price target of US$21.
Meanwhile, Cowen and Bernstein brokers priced their estimates at US$18 per share respectively, with the latter firm cutting their targets from US$24 on the back of lower print revenue estimates this year.
Deutsche Bank recommended that existing investors hold onto their HP Inc assets, citing more upsides for the company’s July-ending quarter.
Their valuation of US$18 per share is predicated on the aforementioned Gartner and IDC PC results, which saw HP Inc grow 17%, versus 4% for market leader Lenovo and even for third placed Dell.
Analysts had found that ‘the HPQ-specific implications were that bullish that we feel the need to provide some thoughts on what they could mean for HPQ’.
HPQ’s sales expected to fall 9.2% year-on-year in Q2
Analysts polled by Bloomberg have given a mean adjusted non-GAAP earning per share (EPS) estimate of US$0.431 per share against expected revenues of US$13.26 billion for the hardware giant’s Q2.
The projected revenue represents a 9.2% year-on-year decrease from Q3 2019, but a quarterly increase of 6.3% from Q2 2020.
Bloomberg Intelligence analyst Marina Girgis wrote that the laptop segment may see an 8% shipment declines in the third and fourth quarters, after having expanded 34% in the second quarter.
As such, she foresees net sales for Q3 and Q4 coming in lower than street projections at US$12.9 billion and US$14 billion respectively, alongside an EPS of US$0.44 and US$0.55.
‘Our scenario analysis is modestly higher than consensus amid a healthier fiscal 2021, yet we only see 1% sales expansion, driven by 3% laptop sales growth and minus 1% to zero sales growth in Printing,’ said Girgis.
For existing shareholders, it is also worth noting that the company’s reported adjusted EPS surpassed consensus projections for the last six straight quarters, while revenue exceeded expectations for three of the last five quarters.
How to trade HP Inc with IG
Are you feeling bullish or bearish on the HP Inc stock? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Look closer this US earnings season
Discover opportunities with using our award-winning technology* and range of educational resources.
- Get expert analysis on upcoming announcements
- Set automated alerts to never miss an opportunity
- Choose from 16,000+ shares with our stock screener
* Based on the Investment Trends 2018 Singapore CFD & FX Report based on a survey of over 4,500 traders and investors. Awarded the Best Online Trading Platform by Influential Brands in 2021.
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.