Last Update 25 Mar 26

Fair value Decreased 34%

HPQ: AI PCs And Memory Sourcing Shifts Will Define Future Upside Potential

Analysts have reset expectations on HP, with the internal fair value estimate moving from about $38.00 to $25.18 as they factor in lower profit margins, a reduced future P/E of 8.8x versus 10.9x, and ongoing memory cost headwinds reflected in a string of lower price targets across the Street.

Analyst Commentary

Street research on HP Inc. has tilted cautious overall, but there are still pockets of optimism that highlight where some see upside potential and support for the current valuation reset.

Bullish analysts acknowledge the memory cost pressure and slower PC backdrop, yet point to areas such as execution on guidance, exposure to software and AI themes, and the current earnings multiple as reasons to keep HP on their radar.

Bullish Takeaways

Several bullish analysts describe HP shares as "cheap," even while keeping conservative ratings, which signals that some see the current P/E compression as already reflecting a lot of the memory and PC demand risks.
HP maintained its FY26 targets for EPS and free cash flow, although toward the low end of prior ranges, and some bullish analysts view this as evidence of disciplined execution despite pressure on margins and input costs.
HSBC includes HP among Buy rated software related names in its broader AI themed call, arguing that enterprise software and embedded agents should benefit from AI integration rather than be disrupted by it. This indirectly supports HP's positioning in PCs and software rich solutions.
Even in cautious hardware preview notes, HP is grouped with peers that are expected to deliver "solid, if not good" quarterly updates. Bullish analysts interpret this as a sign that operational performance is holding up against the memory cost thesis.

For you as an investor, this mixed but constructive commentary means the Street is not aligned in one direction. The bears are focused on memory and PC headwinds, while the bulls see potential in HP's guidance discipline, AI related exposure, and current valuation levels.

What's in the News

Bruce Broussard, a director since 2021 and former Humana CEO, has been appointed Interim CEO effective February 3, 2026, after Enrique Lores stepped down. The Board has launched a search for the next permanent CEO with a global executive search firm involved (Key Developments).
HP reaffirmed GAAP diluted EPS guidance for the first quarter of 2026 at $0.58 to $0.66 and maintained full year 2026 GAAP diluted EPS guidance at $2.47 to $2.77. The company later provided GAAP diluted EPS guidance of $0.52 to $0.58 for the second quarter of 2026 while keeping full year 2026 guidance at $2.47 to $2.77 (Key Developments).
From November 1, 2025 to January 31, 2026, HP repurchased 13,325,000 shares for $325.02 million. Since the current buyback program began in June 2018 the company has repurchased 747,328,104 shares for $19.51255b, representing 61.42% of the program’s stated amount (Key Developments).
At CES 2026, HP introduced multiple AI focused PCs and displays, including the HP EliteBoard G1a Next Gen AI PC, HP EliteBook X G2 Series laptops, HP Series 7 Pro 4K Monitor, a refreshed HP OmniBook portfolio, and new HyperX branded gaming systems and peripherals such as the HyperX OMEN MAX 16 and HyperX OMEN OLED 34 (Key Developments).
Mint Innovation and HP produced what they describe as the first batch of certified closed loop recycled copper using HP’s end of life printed circuit boards for future use in HP PCs, with third party certification from TÜV Rheinland covering quality and traceability standards (Key Developments).
HP, Dell and Acer are reported to be considering the use of Chinese memory chips, according to Nikkei Asia. This could matter for how you think about HP’s future component sourcing and cost structure over time (Periodicals, Nikkei Asia).

Valuation Changes

Fair Value: reset from $38.00 to about $25.18, a reduction of roughly one third in the internal estimate of what HP shares are worth.
Discount Rate: moved from 9.01% to about 9.98%, indicating a slightly higher required return being applied to HP’s future cash flows.
Revenue Growth: adjusted from 2.22% to about 2.31%, a small uplift in the assumed long term top line expansion rate.
Net Profit Margin: revised from 6.61% to about 5.33%, reflecting a meaningfully lower expectation for HP’s ability to convert revenue into earnings.
Future P/E: reduced from 10.89x to about 8.80x, implying a lower valuation multiple being used for HP’s expected earnings.

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Key Takeaways

HP's strategic shifts towards AI and advanced technologies aim to boost revenue and margins by positioning the company at the forefront of workplace tech innovation.
Efforts to diversify manufacturing and achieve significant cost savings are designed to enhance earnings and resilience, especially through reduced reliance on China.
Competitive pricing pressures, geopolitical risks, and execution challenges in AI PCs could adversely affect HP's margins and revenue growth.

Catalysts

About HP

Provides personal computing, printing, 3D printing, hybrid work, gaming, and other related technologies in the United States and internationally.What are the underlying business or industry changes driving this perspective?

HP's acquisition of Humane and integration of their AI-powered platform CosmOS is expected to accelerate the development of an intelligent ecosystem across HP's devices, likely contributing to an increase in revenue and net margins as the company positions itself at the forefront of workplace technology innovation.
The realignment of HP's growth focus towards AI PCs and Advanced Compute Solutions is anticipated to drive revenue growth higher than the core segments, particularly benefiting net margins due to the premium pricing associated with these advanced technologies.
HP is strategically enhancing its manufacturing footprint to diversify production away from China, which is expected to mitigate the impact of tariffs and improve operating efficiencies, potentially leading to higher net margins by reducing costs and enhancing global supply resilience.
The Future of Work initiative, combined with continuous investment in AI capabilities and workforce solutions, is projected to foster significant growth in commercial revenue by driving higher adoption rates of new AI-enhanced PCs and solutions, thereby boosting both revenue and profit margins.
HP's focus on increasing structural savings of $1.9 billion by the end of fiscal year 2025 indicates strong cost management which, combined with pricing actions and strategic investments, is likely to enhance earnings and operate profit margins moving forward.

HP Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more optimistic perspective on HP compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
The bullish analysts are assuming HP's revenue will grow by 2.3% annually over the next 3 years.
The bullish analysts assume that profit margins will increase from 4.5% today to 5.3% in 3 years time.
The bullish analysts expect earnings to reach $3.2 billion (and earnings per share of $3.5) by about March 2029, up from $2.5 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $2.4 billion.
In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 8.8x on those 2029 earnings, up from 6.9x today. This future PE is lower than the current PE for the US Tech industry at 25.3x.
The bullish analysts expect the number of shares outstanding to decline by 2.63% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.98%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

HP is facing a competitive pricing environment, particularly in China where the market remains weak, which could pressure its revenue and print operating margins.
The current global geopolitical landscape and tariffs on Chinese imports present a risk, as they could lead to increased costs and affect the company’s profit margins if further tariffs are introduced or if mitigation strategies are insufficient.
Rising commodity costs have impacted gross margins, and while measures are being taken to offset these headwinds, these mitigation efforts might not immediately compensate the increased costs, thereby affecting earnings.
There is softness in consumer markets with revenue down, which suggests challenges in gaining consumer market share, potentially impacting overall revenue growth.
The dependence on a successful adoption of AI PCs and premium products carries execution risk, and if consumer demand or the refresh cycle does not materialize as expected, it could negatively impact revenue and net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bullish price target for HP is $25.18, which represents up to two standard deviations above the consensus price target of $19.43. This valuation is based on what can be assumed as the expectations of HP's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $26.4, and the most bearish reporting a price target of just $16.0.
In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $60.2 billion, earnings will come to $3.2 billion, and it would be trading on a PE ratio of 8.8x, assuming you use a discount rate of 10.0%.
Given the current share price of $18.89, the analyst price target of $25.18 is 25.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystHighTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystHighTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystHighTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Humane Acquisition And CosmOS Integration Will Transform Workplaces