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HP: everything is not as good as we would like

Hewlett-Packard, stock, HP: everything is not as good as we would like

Over the past 12 months, HP (HPQ) shares have increased by 45%. The PC manufacturer's papers are ahead of the broad market and demonstrate much more positive dynamics than most representatives of the technology sector. It seems that the potential for further growth is limited, while investors should think about profit-taking.

There are several reasons for concern. Fundamentally, HP is still moderate, but there is no room for a strong rally. In 2022, earnings per share of $4.18 are expected, which means the forward P/E ratio barely exceeds 9. However, it is worth remembering that the production of machinery is an industry that is strongly influenced by macro shocks. In other words, the manufacturer's position may change at any moment, and investors are hardly ready to consider HPQ a risk-free asset.

According to the results of the recent quarter, PC sales increased by 13% YoY, to $11.8 billion. This is primarily due to the desire of corporate users to prepare the office for the return of employees: sales to legal entities increased by 25% YoY. A PC is not something that is bought every year, so the positive effect of corporate activity is not able to last for a long time. In addition, it is worth considering the fact that last year IT departments were more busy creating reliable conditions for remote work, which is why they spent less on hardware.

Printers account for $4.9 billion of total revenue. How long will the need to print summaries, presentations and other corporate waste paper last at current levels? With the further digitalization of business processes, one of the most monetary divisions of HP may lose part of its revenue.

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