HP’s Unit And Margin Pressures Not Factored-In By The Stock’s Multi-Year Valuation Highs, Says Morgan Stanley

• Morgan Stanley said HP’s PC margin divergence from peers makes its re-rating increasingly difficult to justify.
• The firm named HPQ its top enterprise ‘Underweight.’
• HP is not providing financial guidance for fiscal 2027, the company said on Monday.

HP Inc. (HPQ) is drawing renewed caution from Morgan Stanley, which said the company’s unit and margin challenges are not reflected in the stock’s “multi-year valuation highs,” according to TheFly.

The firm said HP’s PC margin divergence versus peers is making its recent re-rating “increasingly difficult to justify,” and named HPQ its top enterprise ‘Underweight.’

HP Holds Back Fiscal 2027 Guidance

HP said Monday that it remains in its planning period and is not providing financial guidance for fiscal 2027, reiterating that it is premature to provide specifics, including for PC unit volumes. 

Its preliminary planning assumption, based on current third-party industry forecasts, is that industry-wide PC units will decline roughly mid-single digits in calendar 2027 from 2026 levels. HP cautioned that the assumption depends on second-half 2026 market performance, which remains fluid.

HP’s PC Revenue Rises Even As Units Fall

HP’s fiscal third quarter (Q3) Personal Systems revenue rose 18% year over year to $11.8 billion, even as total units declined 16%. The segment posted a 4.6% operating margin. 

The company’s $0.83 adjusted earnings per share (EPS) included an $0.11 benefit from tariff refunds. Without that benefit, the underlying earnings picture looks less strong than the headline number alone suggests.

On the earnings call, CFO Karen Parkhill said HP’s earlier benefit from lower-cost inventory was “largely behind us,” with higher-cost inventory now moving through the profit and loss statement. 

HP has been raising prices, shifting toward premium products and pursuing product redesign and other cost actions to offset the pressure. 

Parkhill also said HP expects input costs to keep rising, though at a slower pace, and aims to return Personal Systems operating margins to its long-term range “as quickly as possible” in fiscal 2027.

Morgan Stanley had already maintained an ‘Underweight’ rating following HP’s fiscal third-quarter results last month and raised its target to $19 from $17. At the time, analyst Erik Woodring argued that PC unit declines of more than 10% in fiscal 2027 and continued Print pressure could outweigh benefits from AI PCs, according to TheFly.

Retail Sentiment Around HPQ Stock

On Stocktwits, retail sentiment around HPQ stock remains ‘neutral’. 

So far this year, the stock has rallied a little over 51%. In comparison, the Pacer US Cash Cows 100 ETF (COWZ), which holds HPQ stock, has risen nearly 4% over the same period.

See Also: Evercore’s New CIEN Target Implies 58% Upside — Analyst Calls Ciena An Attractive Optical Networking Play

For updates and corrections, email newsroom[at]stocktwits[dot]com.