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HP (NYSE:HPQ) rose 2.3% in pre-market trading on Tuesday amid a double upgrade from Bank of America.
The firm bumped its rating on the printer and PC maker to Buy from Underperform and its price target to $33 from $25.
Palo Alto, California-based HP (HPQ) reached a bottom in free cash flow in 2023 and should see growth from a better PC outlook and lower restructuring costs, analysts led by Wamsi Mohan, wrote in a note.
Growth in operating profit thanks to those pricey inks and tanks, as well as 3D printing, amid tight cost controls. The normalization of free cash flow should add to EPS growth and the company has a striking valuation give material underperformance, down 23% from recent highs to the SPX’s 5% loss in the same time frame, Bank of America said.
HP (HPQ) is down about 25% since mid-July. In late August, the PC giant cut its cash flow and profit outlook for the rest of the fiscal year amid a slow recovery in the PC and printing markets. PC sales fell 11% year-over-year, though total units were up 3%, including an 8% rise in consumer PC units.
Both consumer and enterprise printing revenue declined year-over-year.
“We expect HPQ to accelerate and recognize 40% to 50% of $1.4B gross savings target from the Future Ready Transformation plan in F23 (vs. 40% previously),” BofA said.
HP (HPQ) will hold a securities analyst meeting on October 10.
Analysts are lukewarm on HP (HPQ). It has a HOLD rating from Seeking Alpha authors, Wall Street analysts and Seeking Alpha’s quant system.
Shares are down 4% on the year.