HPQ Sensitivity Analysis: How Changes In PC Market Share Can Impact HPQ’s Value

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Despite secular declines in the PC hardware industry, HP Inc. (NASDAQ:HPQ) has managed to steadily outperform the market due to new launches in the premium segment, catering to both consumer and commercial clients. HP’s market share in the PC market has improved by 180 basis points y-o-y to 22.7% in 2017. Additionally, the company reacquired the #1 spot in the global PC market in 2017, according to IDC. When looking at HP’s stock, it is important to understand how changes in market share can impact the company’s share price. We have created an interactive model that details how changes in market share in the PC market can impact HPQ’s market price. You can modify assumptions such as earnings multiples, margins, average sales prices and others to see how the dynamics of market share/market price sensitivity change.

Our price estimate for HPQ stands at $18, which is 20% below the market price.

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In 2017, HP has launched a host of new PCs such as the Spectre portfolio and Omen X gaming laptop. These new launches helped the company post an increase in shipments in 2017 despite a decline in the global PC market. The company continues to include value-added features to HP’s existing product line, which should help the company to not only improve its share in the PC market but also improve the ASPs for its laptops. This would also improve the company’s margin profile. A 1% increase in projected market share would boost HPQ’s price estimate by around 0.65%.

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