HP (HPQ) stock dropped following the PC and printing major's conservative outlook for the PC industry. HP believes that industry-wide PC unit volumes may see a mid-single-digit percentage decline in 2027 on an annual basis versus 2026. This forecast is based on the company's planning assumption, which is subject to change depending on the performance of the PC industry in the second half of 2026.
It is worth noting that the negative outlook comes after a powerful recovery of HPQ stock and the PC industry in general. HP's recent quarter was marked by double-digit revenue growth driven by growth in commercial systems, premium products, and AI-powered PCs. Meanwhile, unit volumes have been pressured, resulting in an intriguing setup where HP generates increasing revenues while delivering less PC units. The question remains as to whether this trend will continue in 2027.
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About HP Stock
Based in Palo Alto, California, HP is one of the largest manufacturers of PCs and printers, producing notebooks, desktops, workstations, printers, and printer consumables as well as providing related services. Currently, HP has a market capitalization of about $28.2 billion.
At current levels, HPQ stock is down roughly 14% from its 52-week high of $36.22, although shares are up about 78% from the 52-week low of $17.56. This year has been rather successful for the company; HPQ stock has strongly outperformed the S&P 500 Index ($SPX) on a year-to-date (YTD) basis, although the stock has pulled back from its September high.
www.barchart.com The valuation still looks quite reasonable. HP stock trades at a price-to-earnings (P/E) ratio of roughly 9 times and a price-to-sales (P/S) ratio of 0.51 times. That P/S ratio is also lower than the sector average. At the same time, the company's P/E ratio has increased from the end of fiscal 2025.
HP also distributes a generous amount of dividends. The quarterly dividend rate is $0.30 per share, or $1.20 annually, yielding roughly 3.8%. The last declared dividend is set to be paid on Oct. 7.
HP Surprises With Solid Results
HP delivered a solid fiscal third-quarter report on Aug. 26. Non-GAAP EPS amounted to $0.83, up from the $0.75 reported in Q3 2025 and beating the consensus estimate of $0.66. Revenue rose more than 12% year-over-year (YOY) to $15.7 billion, comfortably beating analyst estimates. Meanwhile, GAAP EPS declined 11% to $0.71 amid one-time gains recorded in the previous year.
The Personal Systems segment has been the key driver of HP's growth. Revenue for the segment soared 18% to $11.8 billion, including 22% YOY growth from Commercial Personal Systems. In addition, total Personal Systems units declined 16%, suggesting that both pricing and mix of products played a significant role in the revenue increase. Printing revenue declined 2% YOY to $3.9 billion.
Management also raised its fiscal 2026 guidance. For the year, HP now foresees non-GAAP EPS in the range of $3.19 to $3.29 and free cash flow of $3 billion to $3.2 billion. For Q4, the guidance is for non-GAAP EPS of $0.69 to $0.79, the midpoint of which roughly aligns with Barchart's current consensus estimate of $0.75.
Nevertheless, the outlook for fiscal 2027 adds another variable. HP's latest statement did not include financial guidance for fiscal 2027. Instead, the company is assuming a mid-single digit industry decline for planning purposes. That is important, especially given the fact that the Q3 performance demonstrated that revenue moves very differently from units shipped amid improvement from pricing and product mix.
What Do Analysts Think About HP Stock?
Analysts remain cautious about HPQ stock, giving HP a consensus "Hold" rating overall. The average price target of $28.18 implies potential downside of roughly 10% from current levels. Meanwhile, the highest price target of $38 suggests potential upside of 21% from here, while the lowest target of $19 suggests much more potential downside.
Earnings momentum is rising, HPQ stock remains cheap on fundamental valuation measures, and management raised the fiscal 2026 guidance. Nevertheless, after the powerful rally, this stock already trades above the mean price target, and with HP preparing for the contraction of industry-wide PC units in 2027, pricing, product mix, and production costs could become extremely important.
www.barchart.com On the date of publication, Yiannis Zourmpanos did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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