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HP Is (Still) A Buy, Even After Incredible Rally

Mar. 06, 2018 4:56 PM ETHP Inc. (HPQ)HPE4 Comments
James Brumley profile picture
James Brumley


  • HPQ shares have room to rise even after gaining 37% over the course of the past 12 months.
  • The PC market's slow turnaround is being built on ultramobiles, where Hewlett Packard has proven competitive.
  • The slow-growth 3D printing market is heating up and should accelerate quite a bit come 2019.

In September of last year, I posted some bullish thoughts on computer and printer icon Hewlett Packard, now just called HP (NYSE:HPQ). At the time, it was mostly a lamentation of my then-misplaced preference for former bother Hewlett Packard Enterprise (HPE), though I readily acknowledged the consumer-oriented HP had proven its value on its performance.

Since then, HPQ shares have gained more than 20%. I'm glad I bothered to notice and say something.

Thing is, as technically overbought as the stock may be here, this is one of those turnaround stories that's not over yet. We're only a little more than halfway through it, and the stock likely has plenty more upside to go before all is said and done.

That's the veiled way of saying HP is still a buy.

Not a Lot Not to Like

For the record, the crux of my thesis from six months ago:

While the PC market outlook for the foreseeable future is tepid, on average, most observers may be underestimating the future.

In its most recently reported quarter, HP reported a 15% increase in sales for Personal Systems… its PC unit. It was the sixth consecutive quarter HP logged a year-over-year increase in PC revenue.

To be fair, the rising tide is helping. IDC reported at the beginning of the year that total PC shipments from all vendors grew in the fourth quarter of 2017. It was the first Q4 PC sales increase in six years, up just a hair under 1.0%. Clearly, that tailwind helped. It helped HP a heck of a lot more than it helped its rivals though, underscoring the idea that luck favors the prepared. Hewlett Packard has been redesigning and improving its entire lineup for several quarters now.

That modest uptrend is expected to persist as well. Gartner's PC

This article was written by

James Brumley profile picture
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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in HPQ over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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