Morgan Stanley Downgrades HP Stock Despite Earnings Beat
Despite HP Inc.'s (HPQ) recent earnings beat and strong revenue growth, Morgan Stanley has maintained an Underweight rating on the stock. The firm raised its price target to $19 from $17, implying a potential drop of over 30% from current levels. While HP's fiscal third-quarter revenue increased by 12.5%, much of this came from higher prices rather than increased unit sales—particularly in its PC segment, where shipments fell year-over-year. Morgan Stanley warns that continued price increases could lead to declining demand and further pressure on profit margins as component costs rise. The firm also questions the impact of AI PCs, suggesting they are not driving new demand but merely replacing traditional models without increasing overall sales volume. Analyst Erik Woodring, who has a 59% success rate in his stock calls according to TipRanks, argues that HP's management is overly optimistic about margin recovery. This downgrade adds to growing concerns among investors and follows similar warnings from Bank of America earlier this year.
Topics: HP stock Morgan Stanley price target Underweight rating