HPQ Stock Price Prediction: Reliable Printing Business, Low Valuation, and Decent Dividends Make HP, Inc. A Buy

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

HPQ Stock Price Prediction


  • HP, Inc. makes most of its profits from its printing business, not PC sales.
  • Investors should always give more weigh on how the printing industry is doing rather focus too much on quarterly PC sales performance.
  • HPQ is a consistent dividend payer and has strong history of doing share buybacks.
  • Compared to its sector and industry peers, HP Inc. is still relatively undervalued
  • My 10 Year EBITDA EXIT DCF Valuation model shows HPQ has 38% upside potential.

Hewlett Packard, Inc. (HPQ) is worth adding to your long-term portfolios. HP Inc. is a mature tech company that is relatively undervalued when compared to its sector and industry peers. It doesn’t have the appeal of Facebook (FB) or Amazon (AMZN), but decades-old, boring HP Inc. has been on a momentum run streak this year.

hpq stock price prediction

(Source: getaom.com)

HPQ’s YTD gain of 30% still makes it cheaper than its sector peers which have average forward P/E valuation ratio of 23.39. The 0.66 Price/Sales valuation ratio of HP Inc. makes it a clear bargain during this times of overvalued FAANG stocks. In times of a market pullback or a recession, undervalued companies like HP Inc. will fare better than FANG stocks that now enjoy stratospheric valuations.

Buy HPQ For Its Solid Dividend And Share Buyback History

Investing in slow-growth but safe, mature stocks like HP, Inc. will insure you don’t lose your shirt when your bubble FANG stocks or TSLA shares starts getting pricked by macro or political factors. You invest in HPQ because it can provide you with steady dividend income.  You also get the chance that HP’s management will continue doing its annual share buyback program.

For the past 10 years, HPQ has diligently paid dividends and allocated enough budget to buy back shares every year.

hpq stock predictions

(Source: Vuru)

HP, Inc. definitely touts strong revenue and cash flow to be able to do 10 years straight of dividends and share buybacks. It has a moat that isn’t exactly vulnerable to sudden market changes.

HP Still Has A Growing PC Business

Don’t worry too much about IDC reporting PC sales are down again this Q2 2017.  What matters more is that HP is still the number PC vendor in the world. It also increased its global PC shipments by 6%. Its rival Lenovo (LNVGY) suffered a -5.7% Year-over-Year decline. Asustek, another rival of HP, Inc. also suffered -8.6% Y-o-Y decline.

(Source: IDC)

This goes to show that HP’s recent interest in high-end gaming computers and laptops are producing positive results. HP’s Omen gaming PCs can now challenge Dell’s Alienware division. High-end PC hardware like those made for gamers are high-margin products that are experiencing a sales surge.

HP’s Omen 17 Gaming laptop also touts best-in-class 3D gaming benchmark scores. I am pretty convinced that HP Omen will soon rise as a real alternative to Alienware gaming laptops. HP’s growth as a PC vendor now includes it getting the support and endorsement of hardcore PC gamers. Video games leader Activision Blizzard (ATVI) has even chosen HP Omen computers as its official gaming PCs for its professional Overwatch e-Sports League.

(Source: Notebook Check)

The Best Thing About HP, Inc.

The most attractive thing about HP, Inc. is of course its reliable printing and ink supply business. Unlike other PC vendors like Lenovo, Dell, and Asustek, HP has a great revenue and income generator in its massive global printing business. In fact, HPQ makes most of its profits from selling printers and ink/laser toner supplies.

The Printing segment of HP generates lower revenue than Personal Systems (PC hardware) but it generates 79% of HP’s profits.

(Source: HP, Inc.)

I bought more HPQ because of its global leadership in home printers and industrial printing solutions. HP, Inc. is the only PC vendor on earth today that can survive and flourish even without its personal computer business. HP is a leader in inkjet/laser jet home/office computers with more than 40% market share. HP now owns 100% of Samsung’s (SSNLF) printing business.

HP is also the runaway leader in large-format, industrial-grade printers for commercial/production purposes.

(Source: Wirth Consulting)

The home/office printing and commercial large-format printing industries are still growing. HP dominates in both of these growing markets. HP’s future is also brighter because of its home/commercial-grade inkjet printers. Research and Markets predicts that global emerging ink jet technologies will enjoy a 24.6% CAGR (Compound Annual Growth Rate) from 2017 to 2023. Smithers Pira predicted that the inkjet printing market is worth $67.3 billion this year. HP touts more than 7,000 patents related to inkjet printing technologies. These patents are the reason why HP has a successful business supplying inks to its brand of commercial-grade large-format printers and digital inkjet presses.


The reliable income from its printing business is why HP, Inc. can easily maintain its generous dividend and annual share buyback programs. The revenue from supplying pricey original inks to inkjet printers and laser printers will also help fund Hewlett-Packard’s Research & Development efforts.

My buy rating for HPQ is once again supported by its positive near-term and long-term algorithmic forecasts. I Know First has a very bullish one-year forecast for HPQ. The 1-year predictability score of 0.72 that HPQ now has, told me that this stock will definitely trade higher than $20 within the next 12 months.

Past I Know First Forecast Success with HPQ

I Know First has made accurate predictions on HPQ in the past, such as its bullish article published on December 14, 2016. Despite falling sales, HPQ addressed a much needed issue, security. As technology advances, so does the threat of cyber attack. HPQ addressed these issues by enhancing their security features, such as HP Access Control and HP Capture and Route in their products, in order to instill consumer confidence. Since the article’s release, HPQ shares have increased by 21.43% in line with the I Know First algorithm’s forecast. See chart below.

(Source: Google Finance: HPQ)

This bullish forecast for HPQ was sent to I Know First subscribers on December 14, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

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