15 Best Hardware Stocks According To Goldman Sachs

3. HP Inc. (NYSE:HPQ)

Number of Hedge Fund Shareholders In Q1 2024: 46

HP Inc. (NYSE:HPQ) is HP’s personal computing division that sells computers and printers. The firm’s recent earnings performance has left much to be desired as it has beaten adjusted analyst EPS estimates in just one of its four latest quarters. However, TD Cowen slightly increased the share price target to $32 from $30 in May 2024 and kept a Hold rating on the shares. Explaining its decision, the firm outlined that HP Inc. (NYSE:HPQ)’s AI PCs are sold at higher prices, and the PC maker also stands to benefit from users refreshing their Windows computers and starting to get their hands on the latest AI products.

Like its enterprise counterparts, HP Inc. (NYSE:HPQ)’s forward price to earnings ratio of 10.55 implies that investors expect it to grow slowly than the broader market. As we mentioned above, Goldman Sachs think that the market is wrong and HPQ is a cheap stock. Greenlight Capital mentioned the firm in its Q1 2024 investor letter. Here is what the firm said:

The title of our Sohn presentation was “Solve AI,” which was a play on Solvay’s corporate name. Nonetheless, we established another new long position that actually stands to benefit from AI, which we believe is not reflected in the current stock price. HP Inc. (HPQ) sells computers, printers and adjacent products and supplies. We established an initial position at an average price of $30.76 per share, which is about 9x current year earnings estimates. Recent results reflect a two-and-a-half-year cyclical downturn in demand for computers, which followed a mini-boom driven by COVID and related demand for equipment to work-from- home. We believe that we are, at a minimum, on the cusp of a normal PC refresh cycle, which should drive earnings above estimates. HPQ has committed to return 100% of free cash flow to shareholders through buybacks and dividends. The shares have a 3.6% dividend yield and we estimate HPQ has the capacity to buy back 25-30% of the outstanding shares over the next three years.

. . . .While we have spoken with experts that are divided between being enthusiastic and skeptical of an AI PC cycle, we don’t believe any of the optimism is currently reflected in the share price. HPQ ended the quarter at $30.22 per share.