HP (HPQ) Stock Gains on 2022 Guidance and Boosted Dividend, Analysts Lift Price Targets but Remain Cautious

October 21, 2021 9:50 AM EDT
Get Alerts HPQ Hot Sheet
Price: $37.64 +3.24%

Rating Summary:
    12 Buy, 22 Hold, 4 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 8 | Down: 8 | New: 71
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Shares of HP (NYSE: HPQ) are trading up 5% in today’s trading session after the company presented its 2022 outlook and lifted its dividend by roughly 29%.

The company’s profit forecast for 2022 is above the analyst projections, in the range between $4.07 to $4.27. Bloomberg’s data had the average analyst estimate of $3.78 a share. The company has projected to generate a free cash flow of at least $4.5 billion for fiscal 2022.

“We continue to build a stronger HP. We have delivered exceptional financial performance since our last investor day in 2019 – and we are confident in our plans to deliver sustained revenue, operating profit, EPS and free cash flow growth,” said Enrique Lores, President and Chief Executive Officer, HP Inc.

“We are strengthening our core business, building a more growth-oriented portfolio, and creating a more digital company to meet changing customer needs and capitalize on secular trends across our categories.”

Furthermore, HP raised the annual dividend amount to $1.00 per share, reflecting an approximately 29% increase from the prior dividend.

Cowen analyst Krish Sankar raised the price target on the Market Perform-rated stock to $31.00 per share from the prior $30.00.

“At its 2021 SAM event, HP mgmt laid out FY22 EPS and LT Financial targets that were better than investor concerns around the PC cycle going into CY22. While NT component constraints will gradually resolve, we believe the combination of a 2-4% LT sales CAGR, Print division Op profit expansion, and strong mgmt execution was positive. Buybacks and ~3.5% dividend yield are supportive for shares,” the analyst commented in a note.

Similarly, BofA analyst Wamsi Mohan reiterated an Underperform rating and a $29.00 per share price target. Despite the better-than-expected 2022 outlook, Mohan shared 4 key reasons why he remained bearish.

(1) we are concerned that growth off a cyclically high base for PCs could prove too optimistic,

(2) Print supplies decline of low to mid single digit will pressure margins,

(3) Print hardware ASPs are likely to mean revert significantly lower post the boost last year from limited availability of product during COVID, and

(4) increased dependence on PCs creates a more cyclical company.

“We model well below the company’s F22 goals with decline in revs and operating income offset by strong buybacks,” Mohan commented.

Shares of HP are up 24.3% YTD.

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