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Jefferies Still Buying HP Inc Following Strong PC Sales

HP Inc HPQ reported robust Q3 results, with share gains in the high-end PC market, while announcing weaker guidance due to its initiatives to push printing hardware, Jefferies’ James Kisner said in a report. He maintained a Buy rating on the company, while raising the price target from $16.00 to $16.75.

HP reported its quarterly revenue at $11.89 billion, representing a 4 percent y/y decline and a 1 percent decline in cc terms. The figure came ahead of the consensus expectation of $11.46 billion. The company posted EPS of $0.48, beating the consensus estimate of $0.44.

HP gained share in PCs at the high end. PSG revenue came in at $7.51 billion, representing 7.5 percent sequential growth and significantly higher than the consensus of $6.99 billion. Notebook sales were particularly strong at $4.30 billion, versus expectations of $3.84 billion. Total PCs grew 4 percent y/y. The company indicated that it gained 1.8 points of share y/y, most of which was in high-end laptops.

Weak Guidance

HP guided to Q4 EPS of ~$0.355, short of the Street's $0.41. “The biggest driver of the change to the outlook is that HPQ is taking advantage of a strong yen to more aggressively place high value printing hardware units,” Kisner wrote.

“We like that the company is gaining share in PCs, particularly in the high end. We also like that the company is taking advantage of the weak Yen to place high value Printing units,” the analyst commented. He added that the shares would likely appreciate as the company delivers FCF targets and “investors gain confidence in an improvement of the trajectory of PCs and Supplies.”

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