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Opinions Stuart Hinshelwood
Hewlett-Packard CoHPQDON'T BUYSep 19, 2013
Stuart HinshelwoodStock price when the opinion was issued
As of Jun 17, 2026. Market Open.
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HPQ appears deeply undervalued, but it is increasingly showing signs of becoming a value trap. Growth prospects are limited, and leverage is somewhat higher than they would prefer. The company is also facing margin pressure from rising input costs, including memory. While the dividend remains well covered with a payout ratio of just 33%, the combination of weak growth and negative share price momentum keeps them cautious on the stock. Unlock Premium - Try 5i Free
Stockchase InsightsNot flashy. Iconic brand, huge market share. Trades at less than 7x forward PE. Maybe the business doesn't grow a lot, and maybe there isn't a huge upgrade cycle. But if it can increase margins by only 1%, could add $500M-$1B to bottom line.
Bought back almost half stock in last 10 years; if they do that again, EPS will more than double. Pay-while-you-wait. Lots of upside and margin of safety. Yield is 6.21%.
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Premium contentHP Inc. is an information technology company, which engages in the provision of personal computing and other access devices, imaging and printing products, and related technologies, solutions, and services. It operates through the following segments: Personal Systems, Printing, and Corporate Investments. The Personal Systems segment offers commercial and consumer desktop and notebook personal computers, workstations, thin clients, commercial tablets and mobility devices, retail point-of-sale systems, displays and other related accessories, software, support, and services for the commercial and consumer markets.
Premium contentHP trades at 11.83x compared to Dell’s 28x. It also pays a 3.18% dividend vs. Dell’s 1.28%. Though the two companies make up half the market’s PC sales, HP says its new line of AI PC’s won’t make a dent in their earnings until the second half of 2024 and particularly 2025. The company’s Q2 total revenue for was $12.8 billion, down slightly from last year's $12.91 billion, but better than the $12.59 billion the street expected.
Imaging and printing, personal computing, SaaS. Proceeds from SHOP and NVDA were used to buy this one. Reminds him of ORCL. Strong cashflows, mature business, stable market share, returning significant amounts back to shareholders, progress on efficiencies. Attractive PE in mid-teens. Price target of $39.50. Different from HPE stock. Yield is 3.59%.
(Analysts’ price target is $29.30)
Kim Bolton
This has been a complete turnaround story. Trading at 6X forward earnings. They really need to show execution. There is limited revenue growth, limited sales growth and they are trying to chop expenses of the bottom line. He questions if they really change themselves from a traditional hardware business, which is under a lot of pressure, to something that looks more like a software business. Software is only about 5% of revenue and it is going to be very difficult for them to turn this ship around.