Shares of HP plummeted more than 8% during early trading hours on Wednesday as the technology giant’s fiscal third-quarter earnings failed to meet Wall Street’s expectations. With a revenue of $13.2 billion, falling short of the anticipated $13.37 billion, HP’s underwhelming performance disappointed investors and analysts alike. Although the adjusted earnings per share aligned with projections at 86 cents, the company’s weak guidance citing sluggish PC pricing further intensified concerns.
Bernstein analysts regarded HP’s quarter as “disappointing,” but expressed optimism that PC revenues may improve in the future. They emphasized the need for substantial improvement in the company’s printing business, as weak printer shipments pose a potential threat to supplies growth in the medium term. Despite HPQ’s higher-than-pre-pandemic margins, analysts at Bernstein raised concerns about the long-term viability and growth prospects of the printing business.
Credit Suisse analysts echoed these concerns, emphasizing that HP’s print segment remains their primary apprehension. Discussion surrounding “long-term weakness” and the possible necessity for “more aggressive pricing” raised red flags for the analysts. In light of these uncertainties, they adjusted their fiscal fourth-quarter and full-year estimates for the company, further fueling doubt about HP’s future prospects.
Deutsche Bank analysts also trimmed their outlook on HP, reducing their price target from $32 to $30. While acknowledging that the company’s results were roughly in line with expectations, the analysts noted that weaker demand driven by a slower recovery in China, combined with a bleak long-term outlook for the print business, had impacted HP’s performance. Despite these concerns, the Deutsche Bank analysts did highlight some positive aspects of the report. They commended HPQ’s ability to generate solid operating margins, given the challenging demand environment, and expressed encouragement that the company plans to resume share repurchases in the near term to offset dilution.
Undoubtedly, HP’s disappointing fiscal third-quarter earnings have raised concerns about the company’s future prospects. Falling short of revenue expectations, weak PC pricing, and the uncertainties surrounding its printing business have contributed to the drop in investor confidence. As HP navigates these challenges, it will be crucial for the company to formulate strategies to revive its print segment and address the concerns expressed by analysts. Only time will tell if HP can regain its footing and regain the trust of Wall Street.
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