How Printer Hardware Market Changes Can Impact HPQ’s Value

by Trefis Team
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The global Printer Hardware market is witnessing a slight rebound in sales as shipments grew by 1% in the first nine months of 2017. However, HP Inc. (NASDAQ:HPQ) continued to outperform the market due to new launches in the multi-function laser printers (MFP) and business printing solutions segments. HP’s market share in the printer hardware market improved by 70 basis points y-o-y to 37.5% in the first nine months of 2017 and the company continues to lead the printer hardware industry, according to IDC. While we are concerned that tepid printer hardware sales will impact HP, new product launches – especially in the laser and inkjet MFP segment – should help the company to buoy its shipments and revenues. When looking at HP’s stock, it is important to understand how changes in printer market size and its share thereof can impact HPQ’s share price. We have created an interactive model that details how changes in market share in the printer hardware 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.

In 2017, HP completed the acquisition of Samsung’s Printer Business. This has not only strengthened HP’s portfolio in the A3 copier market but also improved its presence in the A4 MFP market. Furthermore, it continues to launch new printing hardware such as Sproket and Envy. We believe that such launches will continue to boost printer shipments for HP in 2018 and beyond, despite a fairly tepid global printer market. As a result, not only will HP’s share in the printer hardware market improve but also the ASPs for its products. This should also improve the company’s margin profile. We estimate that a 1% increase in the projected printer hardware market share would boost HPQ’s valuation by 0.5%.

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