HP Inc. (NYSE:HPQ) launched a refreshed lineup of its OMEN and Spectre series of laptops at CES 2019. The company seems to be increasing the thrust to sustain the momentum in its PC business. In light of the impending Windows upgrade cycle, the company’s market share position and margin tailwinds, we have revised our price estimate upwards from $27 to $29, nearly 30% higher than the current market price.
Our interactive dashboard on HP’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation.
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Biggest Growth Drivers
The PC division is likely to be HP’s biggest growth driver going forward. Not only has the momentum in the division been evident for the last few quarters, HP’s refreshed lineup of its OMEN and Spectre series of laptops have garnered strong early reviews. This should provide a modest boost to the segment’s revenue going forward.
In addition, memory price weakness is also likely to contribute to margin strength for the company. While on one hand, management views component price weakness as a factor that can help offset currency headwinds, on the other hand HP is clear about not leading the market “down on price.” The momentum in the PC division, coupled with potential for long-term margin expansion, is likely to aid cash flows going forward, which largely explains our price estimate being higher than the current market price. A key risk, however, would be developments in the tariff situation due to the U.S.-China trade dispute.
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