The U.S. tech stocks have been experiencing steep price declines since the beginning of the year. Amid 40-year high inflation rates, growing concerns regarding forthcoming interest rate increases, and an intensifying semiconductor shortage, investors have been liquidating overvalued tech growth stocks. Furthermore…
the escalating conflict between Russia and Ukraine has rattled the fragile stock market.
The bearish sentiment surrounding the tech industry is evident in the tech-heavy NASDAQ Composite Index’s 18% decline year-to-date. Approximately 70% of the tech stocks listed on U.S. exchanges have declined in price so far. However, computer hardware companies are expected to maintain their growth trajectory through the coming months due to strong demand amid a continuing remote culture.
Despite the macroeconomic headwinds, fundamentally strong computer hardware stocks HP Inc. (HPQ – Get Rating), Western Digital Corporation (WDC – Get Rating), and Lenovo Group Limited (LNVGY – Get Rating) are expected to witness robust growth in the long term. Thus, we think the recent dip in the price of these stocks could be an ideal entry point.
HP Inc. (HPQ – Get Rating)
HPQ in Palo Alto, Calif., develops, manufactures, and markets personal computing and other access devices, printing products, and related solutions and services in the U.S. and internationally. The company operates in three segments: Personal Systems; Printing; and Corporate Investments. HPQ serves individual consumers, small-sized and medium-sized businesses, and large enterprises.
On Feb. 23, 2022, HPQ introduced the HP LaserJet Tank MFP 2600s, which is designed for entrepreneurs and small business owners by streamlining print management. This launch is expected to create new revenue streams for the company.
On Feb. 10, 2022, HPQ acquired Choose Packaging, a packaging development company, to scale up its technology. This acquisition might promote sustainability, expand the addressable market, and boost revenues.
In its fiscal year 2022 first quarter, ended Jan. 31, 2022, HPQ’s net revenue increased 8.8% year-over-year to $17.03 billion. HPQ’s earnings from operations grew marginally year-over-year to $1.50 billion. The company’s net earnings rose marginally from the same period last year to $1.20 billion. And its net earnings per share increased 19.6% year-over-year to $1.10.
HPQ is relatively undervalued versus its peers. In terms of forward non-GAAP P/E, HPQ is currently trading at 8.47x, which is 55.9% lower than the 19.20x industry average. Its 0.58 forward Price/Sales multiple is 82% lower than the 3.22x industry average. Its forward Price/ Cash Flow and EV/EBIT ratios of 6.93 and 7.42, respectively, compare with industry averages of 18.40 and 16.56.
Analysts expect HPQ’s revenue for its fiscal 2022 second quarter, ending April 31, 2022, to come in at $16.21 billion, representing a marginal rise year-over-year. The Street expects the company’s EPS for the current quarter to come in at $1.05, representing a 13.2% increase year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
The stock has declined 6% in price year-to-date and 6.8% over the past month. It closed yesterday’s trading session at $35.41.
HPQ’s POWR Ratings reflect this promising outlook. HPQ has an overall B rating, which translates to Buy in our proprietary system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
HPQ has a B grade for Value and Quality. Within the B-rated Technology – Hardware industry, it is ranked #7 of 45 stocks.
To see additional POWR Ratings (Momentum, Stability, Growth, and Sentiment) for HPQ, click here.
Western Digital Corporation (WDC – Get Rating)
WDC in San Jose, Calif., develops, manufactures, markets, and sells data storage devices and solutions in the U.S., Europe, the Middle East, Africa, Asia, and internationally. The company provides…
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