HP Inc (HPQ) has been making headlines recently following interest from a certain world-famous investment fund. This has led to investors scrambling to add HP stock to their portfolio and mentions of the computer company increasing by a massive 300% over the past day. Despite this, HP has had a slow year with its share price increasing by just 1.76% YTD. With such an increase in interest, investors are naturally wondering is HP a good investment? We’re here to help answer this pressing question by highlighting the main pros and cons of HP as an investment.
Is HP a Good Investment - Positives
HP is an interesting stock with tons of good points. Here are a few of the most prominent.
Elon Musk isn’t the only billionaire making big stock purchases. Recently, world-renowned investment manager Berkshire Hathaway, helmed by legendary investor Warren Buffett announced the purchase of around 121 million shares of HP stock, a figure that equates to roughly an 11% ownership stake in the company. As you’d expect, interest from perhaps the best-known investor in the world almost instantaneously caused buyer sentiment to shift bullish, leading to HP stock soaring by 19% following Hathaway’s announcement.
One thing Buffett is well known for is looking for companies that have a good amount of free cash flow and HP certainly fits that requirement. It managed to average an impressive $4 billion of free cash flow per year, a great sign for any potential investor.
Despite HP having a tough time in 2020 due to the pandemic slowing many of its segments, 2021 was much more fruitful with total revenue growing by 12% and earnings per share jumping by an even more impressive 66%. This shows that as market conditions return to normal, HP is likely to flourish.
Dividend-paying stocks provide investors with much-needed regular cash flow. As such, a company paying dividends is always a nice bonus. HP offers a dividend yield of 2.6%, which while not the highest, can still definitely add up.
HP was struggling in the early 2010s, however, under leadership from Dion Weisler, the company managed to revitalize its PC business, by implementing fresh designs and convertible devices. Additionally, Weisler also greatly improved HP’s printing segment, offering a subscription service for ink cartridges and acquiring Samsung’s printing business as well as office equipment supplier Apogee.
Is HP a Good Investment - Negatives
Every investment has its risks and HP is no expectation. Here are a few of the biggest negatives to investing in the computer giant.
Despite intrigue from Berkshire Hathaway, not everything is convinced about HP’s investability. Erik Woodring of Morgan Stanley stated he believes that “PC and consumer spending will be pressured as supply improves and demand normalizes after two years of above-trend growth.”
HP has been struggling to make certain areas of its business profitable. Its printer revenue climbed by 1% over 2021, before falling again by 4% in Q1 2022. Numbers like this are troubling and HP will have to work on improving things before we see large jumps in price.
Hype Asset of the Day - Conclusion
While HP has managed to attract investment from Berkshire Hathaway, the tech company still has a long way to go if it’s to grow by any meaningful amount. While things have been slow for HP, they’re beginning to speed up once again. Is HP a good investment? Only time will tell but Buffett certainly seems to believe so. However, it’ll be a while before we can see if recognition from the Oracle of Oklahoma is enough to get people back interested in HP. If you’d like to receive more trending stocks straight to your inbox, check out our premium plans or to learn more about the services offered by HypeIndex, head over to our FAQ page.
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