The Stock of HP Falls Despite Solid Results, With a Promise to Ship Ai Pcs by the Second Half of 2024

HP Inc.'s stock experienced an initial decline of more than 3% in after-hours trading on Tuesday following the release of the computing giant's quarterly results. Despite generally positive outcomes, the company's commitment to introducing its first AI-powered PCs in the latter half of 2024 did not immediately appease investors.

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In an interview, HP Chief Executive Enrique Lores acknowledged the challenges faced throughout the year but expressed confidence in delivering AI PCs in the second half of 2024. Lores emphasized that these AI-powered PCs could serve as a catalyst for the expansion of the personal computer market. He also noted that, as of now, the company has not observed any adverse impact on holiday sales due to the conflict in the Middle East. Lores maintained optimism about AI contributing to increased personal-system sales in 2024 and beyond, citing progress in cost reductions.

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For the first quarter, HP provided cautious guidance for adjusted earnings, projecting a range of 76 cents to 86 cents per share. Analysts surveyed by FactSet had anticipated adjusted earnings of 86 cents per share. Despite the conservative guidance, Lores expressed optimism about the potential of AI to drive sales growth in the coming year.

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In the fiscal fourth quarter, HP reported net earnings of $900 million, or 90 cents per share, compared to $800 million, or 82 cents per share, in the same period the previous year. Adjusted earnings stood at 97 cents per share. However, net revenue witnessed a decline of 6.5%, amounting to $13.8 billion, down from $14.8 billion in the corresponding quarter a year ago.

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The personal systems segment saw a decrease in net revenue by 8% to $9.4 billion year-over-year, while printing revenue dipped by 3% to $4.4 million. Although these figures were below the levels seen in the prior year, they aligned with analysts' expectations.

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Analyst Daniel Newman, CEO of the Futurum Group, highlighted the significance of HP's foray into AI-powered PCs and the potential for the company to secure a substantial share of this emerging market. Newman emphasized HP's advantageous position due to its extensive design portfolio covering both Intel and Arm-based SKUs. He suggested that the second half of 2024 could be a pivotal period for PCs, with HP well-positioned to compete in this evolving landscape.

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Despite the initial market response, HP's stock has shown resilience, posting a more than 3% gain over the course of the year. In comparison, the S&P 500 index has witnessed an 18% improvement during the same period. Newman stressed that the market would closely monitor Lores' comments on the AI PC initiative, considering it a significant aspect of HP's potential growth story in the latter part of 2024.

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