Printer Business is Almost 25% of HP’s Stock Value
HP (NYSE:HPQ) is the world’s biggest PC manufacturer, ahead of big names like Dell (NASDAQ:DELL) and Acer (TPE:2353). However, HP’s service and printer businesses (specifically printer ink) are actually the two most valuable segments for the company’s operations. These two segments together generate roughly 50% of the company’s stock value by our analysis.
We currently have a $55.49 price estimate for HP’s stock, implying 35% upside to market price. HP’s printing business, which includes both printer and ink cartridge sales, represent nearly 23% of this estimated stock value.
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Below we discuss the outlook for HP’s printing business and the firm’s share in the global printer market.
About HP’s Printing Business
HP is the runaway market leader in the printer and cartridges space with almost 40% market share. Its competitors include Canon, Epson and Lexmark in the printer space.
HP’s offerings include both the inkjet line of printers as well as laser printers. Laser printers include multi-functional printers (MFPs) as well as sole printers and inkjets include all-in-ones as well as sole printer models. Recently, the market has been moving more towards lasers and away from inkjets, with MFPs driving the growth.
Key Drivers of the Business
2. HP’s share in printer market
3. Ink & toner supplies per printer
Below we highlight each of these key drivers in additional detail.
1. Worldwide Printer Market
The worldwide printer market grew at a steady annual pace of 10% between 2004 and 2007. In 2008, it witnessed a decline due in part to the inkjet market. The worldwide printer market declined further in 2009 as the economy deteriorated, before picking back up in 2010. Going forward we estimate that the worldwide printer market will continue a moderate growth rate. See more…
2. HP’s Share in the Printer Market
HP’s market share grew from ~33% in 2004 to 40% in 2009 as the firm strengthened its #1 position atop the printer market. However, in 2010, HP’s share in the printer market dropped, largely due to increased competition from Lexmark.
HP is still the undisputed king of the worldwide printer market and we only expect its market share to hover around 40% in the coming years. See more…
3. Ink & Toner Supplies per Printer
HP has seen a slight decline in the annual number of ink cartridges sold per printer, an effect driven by its high exposure to the declining inkjet market. As laser printers push inkjet printers out, HP (the inkjet supplies market leader) will likely see a decline in its ink cartridge per printer sales until the shift away from inkjet stabilizes. See more…