Key Takeaways:
- CEO Transition: HP Inc. announced last February that Enrique Lores stepped down as President and CEO with Bruce Broussard appointed as Interim CEO, while the company reaffirmed its Q1 and fiscal 2026 outlook amid ongoing memory chip shortage pressures affecting the PC industry.
- Memory Cost Headwind: HP Inc. guided last December for $700 million in tariff costs and $0.30 in EPS impact from elevated memory costs in the back half of fiscal 2026, representing 90 basis points of pressure on Personal Systems margins as the company navigates a worsening DRAM and NAND shortage.
- Price Target Framework: Based on 1% revenue growth, 7% operating margins, and a 6x exit multiple, HP Inc. stock could reach $24 by October 2028 from $19 today.
- Return Profile: HP Inc. implies 27% total upside from $19 to $24 over 3 years, equating to a 9% annualized return under assumptions that AI PC penetration reaches 50% of shipments in fiscal 2026 and memory cost pressures ease by fiscal 2027.
Breaking Down the Case for HP Inc.
HP Inc. (HPQ) serves global markets through its Personal Systems segment selling PCs, workstations, and peripherals, and its Print segment offering hardware, supplies, and industrial printing solutions, positioning itself in a $55 billion annual revenue business facing leadership transition and memory chip shortage headwinds in fiscal 2026.
Financially, the company delivered $55.3 billion in fiscal 2025 revenue reflecting 3% growth, yet operating income of $3.7 billion compressed operating margins to 7% from 8% the prior year as tariffs absorbed $500 million and the print market remained structurally soft.
Last February, Enrique Lores stepped down as President and CEO with Bruce Broussard appointed as Interim CEO, creating leadership uncertainty as the business navigates a worsening memory chip shortage that prompted Lenovo to warn of mounting PC shipment pressure and caused HP shares to fall 3% to $19.22.
Management issued fiscal 2026 guidance last December projecting $700 million in tariff costs and $0.30 in EPS impact from elevated DRAM and NAND costs in the back half, representing 90 basis points of pressure on Personal Systems margins, while targeting $1 billion in cost savings over 3 years.
CFO Karen Parkhill stated at the UBS conference last December that “this isn’t our first rodeo, we’ve had these headwinds before, we are well honed in how we deal with them,” framing memory cost pressures as temporary despite industrywide supply constraints.
The company achieved 30% AI PC penetration in fiscal 2025 and targets 40% to 50% in fiscal 2026, while its print subscription offering surpassed 1 million subscribers and industrial print reached $1.8 billion in revenue after 9 consecutive quarters of growth.
HP announced last February a $50 million commercial agreement with ePac over 3 years covering 10 HP Indigo 200K digital presses, representing continued momentum in industrial print, while the Win 11 refresh cycle has 40% remaining with SMB customers across EMEA and Asia Pacific still transitioning.
The investment tension centers on whether fiscal 2026 guidance adequately accounts for memory cost pressures creating $0.30 in EPS headwind, leadership transition risk with Lores’ departure and Broussard’s interim appointment, and execution risk in scaling AI PC penetration from 30% to 50%.
This unfolds against a backdrop of $19 current stock price, 8x forward P/E below the 9x 10-year historical average, and 9% projected annualized returns through October 2028 that depend on memory costs normalizing by fiscal 2027 and operating margins stabilizing near 7%.
What the Model Says for HPQ Stock
HP Inc. stock reflects leadership transition uncertainty with Lores’ departure last February and memory cost pressures creating $0.30 EPS headwind in fiscal 2026’s back half, yet AI PC penetration scaling from 30% to 50% and $1 billion cost savings program support stabilization assumptions despite the NTM P/E compressing from 9.1x in January 2025 to 6.3x in February 2026.
The market assumption underwrites 1.1% revenue growth, 6.9% operating margins, and a 6.1x exit multiple, producing a $24.46 target price by October 2028, with growth sitting below fiscal 2025’s 3.2% actual yet margins declining from 8.4% fiscal 2024 levels as EBITDA margins compressed from 10.0% to an expected 8.2% in fiscal 2026.
This valuation delivers 27.0% total upside and a 9.2% annualized return from $19.26, representing returns that fall below a typical 10% equity hurdle rate while embedding execution risk tied to memory cost normalization and print market structural decline as free cash flow yield expanded from 11.5% to 16.7% over the past year.
Given modeled returns of 9.2% annualized that marginally undershoot equity hurdles amid interim CEO uncertainty and $700 million tariff absorption, the model signals a Hold, favoring capital preservation over aggressive appreciation as fiscal 2026 guidance plays out and operating margin stabilizes near 7%.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for HP stock:
1. Revenue Growth: 1.1%
HP Inc. stock’s revenue history shows deceleration from a 10-year CAGR of negative 6% to 3% one-year growth in fiscal 2025, as Personal Systems grew 8% while print remained structurally soft.
The 1.1% growth assumption sits below the 1-year growth of 3%, as fiscal 2026 guidance faces $700 million in tariff costs and $0.30 in EPS headwind from elevated memory costs creating 90 basis points of Personal Systems margin pressure.
Current execution supports 1.1% growth as AI PC penetration reached 30% in fiscal 2025 and targets 40% to 50% in fiscal 2026 with higher average selling prices, while Win 11 refresh cycle has 40% remaining.
Forward progress requires memory cost headwinds to ease by fiscal 2027 as 1 to 2 year supply agreements provide near-term cushion, and leadership transition with Broussard as interim CEO to not disrupt execution momentum.
Sustaining 1.1% growth depends on Personal Systems maintaining momentum as Lenovo warned last February about mounting PC shipment pressure from memory chip shortages, while print’s structural decline must be offset by Big Tank placement and industrial print scaling.
This sits below the 1-year revenue growth of 3.2%, as fiscal 2026 faces temporary memory cost headwinds and tariff absorption that constrain near-term expansion without accounting for AI PC premium pricing uplift beyond base assumptions.
2. Operating Margins: 6.9%
HP Inc. stock reported 8.4% operating margins in fiscal 2024 and 7.2% across five years, yet fiscal 2025 operating income declined 13% to $3.7 billion as SG&A expenses remained elevated and tariffs absorbed $500 million.
The 6.9% margin assumption sits below the 1-year level of 8.4%, as fiscal 2026 consensus expects compression with EBITDA margins declining to 8.2% as memory costs create 90 basis points of Personal Systems pressure and $700 million in tariff costs flow through.
Margin durability depends on the company’s $1 billion gross annualized cost savings program over 3 years offsetting external headwinds, as CFO Karen Parkhill stated last December that “this isn’t our first rodeo” regarding memory cost navigation.
Forward execution requires Personal Systems to maintain pricing discipline as AI PC configurations garner higher prices offsetting memory cost pressures, while print must sustain highest-in-class competitor margins despite two price increases in fiscal 2025 already implemented.
Any deviation in memory costs persisting beyond fiscal 2027 compresses margins faster, as the back half fiscal 2026 impact assumes spot prices moderate, while Japanese competitors benefiting from favorable yen dynamics create pricing pressure in print.
This sits below the 1-year operating margin of 8.4%, as fiscal 2026 absorbs peak memory cost and tariff headwinds before normalization, and valuation assumes margins stabilize near 7% without expansion toward 9% fiscal 2021 levels.
3. Exit P/E Multiple: 6.1x
HP Inc. stock’s valuation history centers on multiples tied to mature PC and print businesses facing structural headwinds, with the 1-year NTM P/E at 7.7x compressing from 9.1x in January 2025 to 6.3x in February 2026.
The 6.1x exit multiple capitalizes normalized earnings under the assumption that fiscal 2026’s $700 million tariff costs and $0.30 EPS memory headwind prove temporary, AI PC penetration reaches 50% without cannibalizing unit volumes, and interim CEO Broussard completes leadership transition smoothly.
This multiple assumes the market values HP below its 5-year average of 8.6x and 10-year average of 9.1x as operating margins compress from 8.4% to 6.9% while print’s structural decline offsets AI PC momentum despite 10th consecutive dividend increase.
The exit multiple sits slightly below the Market assumption NTM P/E of 7.7x for fiscal 2025, yet this valuation assumes no re-rating as memory costs normalize and depends entirely on earnings stabilization rather than margin expansion.
Terminal valuation depends on print’s structural decline not accelerating as office market usage remains stable, while Personal Systems must deliver on AI PC penetration targets without memory shortages constraining supply or forcing margin-dilutive specification downgrades.
This sits below the 5-year P/E of 8.6x and 10-year P/E of 9.1x, as margin compression from 8.4% to 6.9% and print’s ongoing structural challenges prevent multiple expansion without re-rating upside even as execution stabilizes through fiscal 2027.
What Happens If Things Go Better or Worse?
HP Inc. stock results are shaped by memory cost normalization timing, AI PC penetration rates, and print market stabilization as leadership transition completes through October 2030.
- Low Case: If memory costs persist beyond fiscal 2027 and print declines accelerate, revenue grows 1% and net margins hold 5% → 4% annualized return.
- Mid Case: With memory headwinds easing by fiscal 2027 and AI PC penetration reaching 50%, revenue grows 1% and net margins reach 5% → 8% annualized return.
- High Case: If AI PC premium pricing sustains and cost savings exceed targets, revenue grows 1% and net margins approach 5% → 11% annualized return.
How Much Upside Does HP Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
