HP (HPQ) is drawing fresh attention after partnering with Asurion to launch HP Care Complete, a subscription based device protection and support offering that is now available to U.S. customers across PCs and connected home devices.
See our latest analysis for HP.
HP shares have gained momentum recently, with a 30 day share price return of 23.62% and a 90 day share price return of 36.71%, while the 1 year total shareholder return sits at 18.91%.
If this shift toward services and device protection has your attention, it can be useful to see how other hardware focused companies are positioned within the 55 AI infrastructure stocks
HP now has a fresh services story and a stock that has already moved. The key issue for investors is whether the current share price fairly reflects this shift or already incorporates most of the potential upside.
Most Popular Narrative: 30.7% Overvalued
HP last closed at $29.94, while the most followed narrative suggests a fair value of $22.91 using a 9.76% discount rate and flat overall revenue assumptions.
Analysts are assuming HP's revenue will remain fairly flat over the next 3 years. Analysts assume that profit margins will increase from 4.4% today to 4.6% in 3 years time.
Want to understand why a modest margin shift still supports that fair value gap for HP? The narrative focuses on disciplined earnings growth, steady revenue and a future earnings multiple that differs from what the broader tech sector currently commands.
Result: Fair Value of $22.91 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, HP still faces pressure from structurally weaker print demand and intense PC price competition, which could squeeze margins and challenge the current overvaluation narrative.
Find out about the key risks to this HP narrative.
Another View on HP’s Valuation
While the most popular HP narrative points to a 30.7% premium to fair value, the SWS DCF model points in the opposite direction. At $29.94, HP is described as trading about 31.9% below an estimated future cash flow value of $43.98, which raises a very different question for investors.
Look into how the SWS DCF model arrives at its fair value.
Next Steps
With HP pulling in different views on valuation, it makes sense to check the underlying data yourself and move quickly to form your own stance. A useful place to start is by weighing the 3 key rewards and 3 important warning signs.
Looking for more investment ideas beyond HP?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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