Wells Fargo analyst has reaffirmed a Market Perform rating on the stock, after a meeting with HP’s Mike Salfity
Wells Fargo analyst Maynard Um, issued a research note today wherein the analyst has raised the valuation range on HP Inc (NYSE:HPQ) stock to $13-$14 from $12.5-$13.5 and reiterated a Market Perform rating on the stock.
The upgrade in valuation range comes after Maynard Um’s meeting with Mike Salfity, who is the General Manager and Global head of Graphics Solution Business at HP.
The analyst mentioned in the report published today that while HP’s consumer and business printing always receives the “lion’s share of attention”, the Graphics business is a division where the company needs to focus more on in order as it is a critical division which may trigger future growth catalysts.
The DRUPA graphics trade show, held in Dusseldorf highlighted the momentum of transition from analog to digital. The analyst mentioned that each and every hall is now digital, shedding light upon the striking change in comparison to the last show four years back. The Palo-Alto, California based technology company showcased 56 presses and signed the largest Indigo deal in its history with Shutterfly – which is considered to be $25 million for 25 presses.
Although the management at HP does not disclose the size of its Graphics business segment, the analyst estimates it may contribute about 15% of total Print revenue. Additionally, the analyst believes that the number is vital as a future growth catalyst and it is growing.
Moreover, Maynard Um also mentioned that in future the Graphics printers tend to have positive margins, with 90% to 100% services attach and use 100% HP-Branded supplies. In addition to this, the Graphics printers stimulate noticeable supplies attach as the supplies grew by 4% over the past quarter.
The raise in analyst’s valuation range is also backed by the thesis that the Graphics printer business is set to aid print hardware margins while in the longer term, it is expected to drive supplies.
The reaffirmation of a Market Perform rating on the stock by the analyst comes on the heels of the supposition that the current year would continue to be a transition period with growth in HP’s strategic business units still being offset by secular pressures in the legacy business.