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In recent days, Morgan Stanley downgraded computer hardware makers including HP, highlighting concerns about the impact of rising NAND and DRAM memory chip prices driven by artificial intelligence demand could hit hardware OEM earnings.
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This signals that rapid increases in memory component costs could challenge profit margins for leading hardware companies like HP, Dell and Hewlett Packard Enterprise as they manage shifting input costs.
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We’ll assess how rising memory chip prices and cost pressures highlighted by Morgan Stanley could impact HP’s outlook and investment narrative.
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To be a shareholder in HP today, you need to believe in the company’s ability to transform rising demand for AI-powered PCs and subscriptions into sustainable growth while managing cost constraints. Morgan Stanley’s recent downgrade on rising memory prices has put a renewed focus on cost pressures, which now present the biggest near-term risk to HP’s margins and dampens some optimism about AI PC speeds as a short-term catalyst.
Among the company’s recent moves, HP’s launch of All-In Plan in August, a new printer subscription service, is prominent. This aligns with efforts to build predictable, high-margin recurring revenue, which could help offset earnings against volatile hardware costs and underlines why subscription growth is considered critical to HP’s medium-term outlook.
However, despite recurring revenue profit traction, investors should keep a close eye on signs that memory price inflation could weigh on future quarters…
Read the full story on HP (it’s free!)
HP’s story projects $56.8 billion in revenue and $2.9 billion in earnings by 2028. This requires 1.3% annual revenue growth and a $0.3 billion earnings increase from $2.6 billion today.
Highlight how HP’s forecasts yield a fair value of $28.28, which is 24% above its current price.
Simply Wall St. Community’s five individual fair value estimates range from US$28.27 to US$38.11 per share. While community members see a substantial upside, the recent increase in memory chip prices creates fresh risks that could impact sentiment and future performance, so it is worth considering multiple perspectives when evaluating HP.
Explore 5 other fair value estimates on HP – why the stock may be worth 67% more than the current price!
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