Last week, HP Inc. (NYSE:HPQ) slumped after posting Q2/2021 results. What happened?
HP posted strong non-GAAP EPS of 93 cents (and 98 cents on a GAAP basis). Revenue soared by 27.2% Y/Y to $15.9 billion. Adjusted operating margin was 9.1%, while free cash flow of $1.3 billion missed consensus estimates of $1.45 billion.
HP Forecast Q3/2021 EPS will be in the range of 77 – 81 cents (non-GAAP). For the full-year 2021, non-GAAP EPS will be between $3.40 - $3.50. At a forward price-to-earnings ratio of around eight times, the stock could still head lower. HP executives forecast ongoing PC component shortages.
Inflationary components will raise unit prices and could hurt demand. As the pandemic winds down, the pent-up demand lifting Lenovo, Dell, and HP sales will wane. HP’s CFO Marie Myers said, "We expect supply constraints to continue to negatively impact our ability to meet demand in PCs and Printers, at least through the end of calendar 2021."
Lenovo posted its best-ever Q4 PC and smart device sales on May 27. But the stock backed down from the $28.80 high. Markets are forward-viewing and anticipate lower demand from higher prices. With staff going back to the physical workspace, the need for multiple work systems will slow.
The bullish PC cycle is coming to an end. Investors should consider lowering their expectations for the computer supplier stocks.
