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Why HP Stock Is Falling Today

What happened

Shares of HP (NYSE: HPQ) tumbled Tuesday morning after an analyst downgraded the company and cut his price target for the stock.

The tech stock fell by as much as 5.8% early in the session and was down by 3.9% as of 11:42 a.m. ET.

So what

Evercore ISI analyst Amit Daryanani downgraded HP from his previous outperform rating to an in-line rating and cut his price target for its shares from $43 to $36.

Image source: Getty Images.

Daryanani thinks that consumer PC demand will continue to slow down this year and that HP could end up with too much inventory on its hands.

"We think PC headwinds could get more severe," he wrote in a research note, and added: "Higher inventory levels in a deflationary environment could impede both sales & margins."

Daryanani believes the PC industry will be affected by slowing consumer demand in several markets, including Europe and China, and said that total industry shipments will be under 300 million for the year.

Now what

Demand for PCs spiked during the height of the pandemic, but more recently, consumers have pulled back on some computer purchases amid rising inflation and fears about a potential recession.

Other tech companies, including Intel and Nvidia, have signaled that they expect chip demand could slow this year, and based on Daryanani's comments, it appears that a widespread consumer tech slowdown is more likely than not.

With technology stocks bearing the brunt of the recent marketwide sell-off, it's no surprise that HP's shares are falling further Tuesday morning after the stock's downgrade.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends HP, Intel, and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.


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