What Happened?
Shares of personal computing and printing company HP (NYSE:HPQ) jumped 8.2% in the morning session after RBC Capital analyst David Paige initiated coverage on the company with a Sector Perform rating. According to StreetInsider, a Sector Perform rating typically indicates an expectation that the equity will perform roughly in line with the broader sector or market benchmarks over the medium term. Initiations of coverage by major investment banks often generate fresh market visibility and trading interest as investors digest new Wall Street analysis and position their portfolios accordingly.
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What Is The Market Telling Us
HP’s shares are quite volatile and have had 17 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 15 days ago when the stock dropped 5.8% on the news that the company reported second-quarter financial results that revealed compressed profit margins in its personal computer division, overshadowing better-than-expected top- and bottom-line growth. According to a company press release, HP generated revenue of $15.68 billion for the quarter, up 12.5% year-over-year, driven by an 18% year-over-year increase in Personal Systems revenue to $11.8 billion. Conversely, Printing segment revenue fell 2% compared to the prior-year period to $3.9 billion. Operating margins in the Personal Systems division dropped to 4.6% due to higher component costs. Adjusted earnings per share came in at $0.83, comfortably topping consensus estimates of $0.69. Management also lifted its full-year adjusted EPS outlook to between $3.19 and $3.29, supported by tariff refunds. However, according to TipRanks, analysts at Bank of America reiterated an Underperform rating on the stock, citing margin pressure from rising memory costs, slower PC unit growth, and uncertainty surrounding the company's leadership transition.
HP is up 58% since the beginning of the year, and at $34.94 per share, it has set a new 52-week high. Investors who bought $1,000 worth of HP’s shares 5 years ago would now be looking at an investment worth $1,231.
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