hp stock is falling

HP (NYSE: HPE) stock is trading lower in US price action today after reporting fiscal third-quarter 2022 earnings. While its profits were largely in line with estimates, its sales fell short of analysts’ estimates.

HP reported revenues of $14.66 billion in the quarter, which was 4.1% lower than the corresponding quarter last year and way below the $15.74 billion that analysts were expecting.

Its Personal Systems revenues fell 3% YoY to $10.1 billion and were almost $1 billion lower than what analysts were expecting. Notably, sales of PCs have taken a hit in 2022 and Gartner predicts sales to be 10% lower this year.

Almost all the companies in the ecosystem, from PC makers, chip manufacturers, and memory companies have pointed to the slump in the industry, which is only magnified by higher inventories.

Rival PC maker Dell posted revenues of $26.4 billion in the fiscal second quarter of 2023 which was 9% higher YoY but fell short of the $26.6 billion that analysts were expecting. Its adjusted EPS of $1.68 was however ahead of the $1.64 that analysts were expecting.

Dell Also Posted Mixed Earnings, Stock Fell after the Release

During the fiscal second quarter, Dell’s consumer sales fell 9% to $3.3 billion. However, its commercial PC sales rose 15% to $12.1 billion. Notably, a lot of companies have recalled employees back to offices and others are in the process of doing so. During their previous earnings call, HP said that while consumer demand for PCs is witnessing a slowdown, the enterprise demand is holding up well.

However, HP sounded circumspect on even the commercial PC sales after releasing the fiscal third-quarter earnings. Enrique Lores, HP’s CEO said speaking with Jim Cramer that “What we have seen during the quarter is a slowdown of consumer demand that really accelerated as the quarter progressed. We also have started to see some signs of slowing down on the commercial space.”

The PC industry is witnessing a severe growth slowdown. Firstly, the industry is battling tougher YoY comps as sales were strong in 2020 and 2021 because more people bought new PCs to work from home. A lot of sales boost PC makers saw in 2020 and 2021 was also due to the pull forward of demand.

HP Lowers Forecast, Stock Falls

HP also lowered its full earnings forecast and now expects to post an adjusted EPS between $4.02 to $4.12 in the year. Dell also guided for revenues between $23.8-$25 billion in the current quarter which at the midpoint would mean an 8% YoY decline and was also short of the $26.4 billion that analysts were expecting.

Dell’s Co-COO Chuck Whitten said, “there’s caution around future hiring, trade-offs within their IT budgets given the macroeconomic uncertainty, customers reducing the size of orders and buying for only immediate requirements.”

HP also echoed similar views and Lores said, “We really think this is driven by the macroeconomic situation that we are facing.” He added, that there “have been more and more companies being cautious about how to manage budget and really be careful about how many new employees they hire.”

Meanwhile, while HP stock has fallen this year, Berkshire Hathaway chairman Warren Buffett bought HP shares in the first quarter of 2022. We have a guide on how you can buy stocks with credit cards.

While Buffett was on the sidelines in 2021 and was a net seller of stocks in all four quarters, he poured billions into buying stocks in 2022. Among others, he has bought more Apple shares and added to the already humongous position.

PC Sales are Weak in 2022, HP Says the Slowdown in Temporary

HP termed the current slowdown as temporary. Meanwhile, chipmakers like Nvidia are also hit by falling PC sales. Nvidia posted revenues of $6.7 billion in the fiscal second quarter of 2023, which was in line with its toned-down guidance and analysts’ estimates. However, its adjusted EPS of $0.51 was way below the $1.26 that analysts were expecting.

It guided for revenues of $5.9 billion in the fiscal third quarter, which was over $1 billion lower than what analysts were expecting. It also blamed “challenging market conditions” and said it would adjust its pricing. Nvidia is betting on metaverse and autonomous driving to drive its long-term growth.

Apple also reported a fall in its Mac revenues in the June quarter. The company is expected to launch four new iPhone models at the launch event next week.

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