A HP logo sits on top of a desktop computer’s shipping box
Simon Dawson/Bloomberg
As the world shifted to working and learning from home over the last year, demand for personal computers has skyrocketed, reaching a 20-year high. And there are growing expectations that the heightened demand is going to linger for multiple quarters to come.
On Monday, Citi analyst Jim Suva increased his forecast for 2021 PC-unit growth to 13% from 5%, citing positive recent results from Taiwan-based notebook contract manufacturers. He also notes that supply constraints remain a factor, with demand ahead of supply, driving up prices.
Suva adds that the shift to hybrid work has the potential to shift the addressable market from one PC per household to one per person in the household. Suva adds that a shift to notebooks from desktop also is a positive given a typically shorter lifecycle. He thinks annual unit sales for the PC market will jump from the 250 million range to as much as 340 million.
He also is growing more optimistic about the HP (ticker: HPQ) printer business, noting that peers are seeing strength in home printers, though office printing demand remains “tepid.” He points out that Canon recently raised guidance for its print business.
Given that background, Suva raised his rating on HP shares to Buy from Neutral, setting a price target of $40. He now sees sales or the quarter of $16.3 billion, while the Street is looking for $15 billion. Suva sees adjusted profits for the quarter of 95 cents a share, above the company’s forecast range of 82 cents to 88 cents a share.
All that said, Suva adds that Dell Technologies (DELL) remains his top U.S. stock pick for 2021, and keeps his $120 price target. He writes that commercial PC demand is likely to pick up in the months ahead—and he adds that the company’s enterprise hardware and software businesses should benefit from an expected pick-up in corporate IT spending. He’s also bullish on the pending spin-off of the company’s majority stake in VMware (VMW), a move that will reduce Dell’s debt load.
Both HP and Dell report April quarter earnings on Thursday.
On Monday, HP stock is up 2.3% to $32.38, while Dell stock is up 1.3% to $99.71.
Write to Eric J. Savitz at [email protected]
