HP CEO Predicts Recovery in PC Demand plus AI PCs to Drive Growth

What You Need To Know

HP Inc. (NYSE: HPQ) CEO Enrique Lores is optimistic about a recovery in PC demand in the second half of this year despite a mixed outlook for the first half of 2024. While commercial demand has slowed, Lores believes growth will return to the PC market.

However, there are ongoing challenges in the computer and printer markets, with laptop shipments falling 16% month over month in January. HP saw sales decline in both its personal systems and printers divisions for the first fiscal quarter, with total revenue of $13.2 billion missing analyst estimates.

Despite this, the company expanded quarterly profit margins year over year in both divisions. Lores also mentioned that introducing AI PCs could boost the company's top line in the future.

HP Inc. reported net sales of $13.2 billion, marking a 4.4% decrease compared to the previous year and falling short of the $13.58 billion estimate. Sales in the Personal Systems division totaled $8.8 billion, also down by 4.4% year over year, missing the $9.2 billion forecast.

Printer sales dropped by 5% to $4.4 billion, slightly surpassing the $4.39 billion estimate. The company's diluted earnings per share (EPS) increased by 11% year over year to $0.81, aligning with expectations and within the guided range of $0.76 to $0.86.

Why This Is Important for Retail Investors

1. Insight into Market Trends: Understanding the current state of the PC market and anticipating future recovery can provide valuable insights for retail investors, allowing them to make informed decisions regarding their investment portfolios.

2. Impact on Tech Stocks: The performance of companies like HP Inc. can have a significant impact on the technology sector as a whole. Retail investors investing in tech stocks will benefit from staying informed about the challenges and opportunities in the PC market.

3. Earnings Expectations: The earnings report and guidance from HP Inc. provide crucial information for retail investors, allowing them to assess the company's financial health and make decisions based on its performance relative to market expectations.

4. Market Sentiment Indicator: The performance of HP Inc. and its projections can serve as an indicator of market sentiment in the PC industry. Retail investors can use this information to gauge market conditions and make strategic investment choices.

5. Potential for Future Growth: HP's CEO's mention of AI PCs indicates potential growth opportunities for the company. Retail investors can consider this information when evaluating the long-term growth prospects of their investment portfolios, particularly in the technology sector.

How Can You Use This Information?

Here are some of the investing ideas that can be explored using this information:

Value Investing

Retail investors can explore opportunities in HP Inc. by assessing its stock value relative to its intrinsic worth and considering its potential for recovery in the PC market.

Value investing searches for undervalued companies that trade for less than their intrinsic values, with the expectation that the market will eventually recognize them.

Growth Investing

With the anticipation of a recovery in PC demand, retail investors may consider HP Inc. as a potential growth investment, given the company's prospects for future expansion and the introduction of AI PCs.

Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.

Defensive investing

Given the challenges in the PC market, retail investors seeking stable investments may consider a defensive strategy by carefully evaluating HP Inc.'s financial health and performance compared to its competitors.

Defensive Investing focuses on securing a portfolio by choosing companies less sensitive to economic downturns.

Dividend Investing

Retail investors interested in generating income through dividend payments may assess the sustainability of HP Inc.'s dividends and the company's ability to maintain or increase those payments over time.

Dividend investing targets companies that regularly distribute a portion of their earnings to shareholders as dividends.

Thematic Investing

Retail investors focusing on the technology sector or the advancement of AI may find HP Inc.'s mention of AI PCs as an opportunity to align their investments with this thematic trend in the industry.

Thematic Investing selects assets based on projected trends or themes believed to offer growth opportunities.

Read What Others Are Saying

Yahoo: HP CEO: PC demand remains a challenge, though AI computers are coming

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Popular ETFs

Some investors prefer to invest in stocks via an exchange-traded fund for ease and reduced risk. Some popular ETFs include the following:

• Technology Select Sector SPDR Fund (XLK): This ETF aims to replicate the performance of the Technology Select Sector of the S&P 500 Index. It invests in technology and electronic-related companies, where HP Inc., a major player in the computer and printer market, could be a component.

• Vanguard Information Technology ETF (VGT): VGT seeks to track the performance of a benchmark index that measures the investment return of stocks in the information technology sector. Given HP's significance in this sector, it may be included in VGT's holdings.

• iShares U.S. Technology ETF (IYW): This ETF aims to track the investment results of an index composed of U.S. equities in the technology sector. HP Inc., as a key technology firm, could be part of this ETF's portfolio.

• First Trust NASDAQ Technology Dividend Index Fund (TDIV): TDIV is an option for investors looking for technology companies with a dividend focus. HP Inc. has a history of paying dividends, making it a potential holding in this ETF.

• VanEck Vectors Semiconductor ETF (SMH): While primarily focused on semiconductor companies, SMH also invests in the broader technology sector, including companies like HP that play a significant role in the technology and electronics markets.