What happened

Shares of HP (HPQ -0.09%) fell 10.3% through Thursday trading this week, after the tech hardware maker reported its fiscal third-quarter earnings.

It has been a brutal few months for virtually all computer makers, who are now experiencing a hangover after seeing surging demand during the height of the pandemic. HP's printing division also saw year-over-year declines, which didn't help matters. Furthermore, management guided for more profit declines in the current quarter.

Warren Buffett's Berkshire Hathaway actually bought shares of HP in the first quarter of 2022. Given that shares are now well below where Buffett bought in, is HP a buy?

So what

In its fiscal third quarter, ended July 31, HP's revenue declined 4.1% and net income declined 10%, but the company's earnings per share actually increased 4%, thanks to HP's enormous amount of share repurchases.

HP's enterprise-focused segment held up relatively well, with desktops and workstations up year over year; however, the consumer segment is in the dumps, with notebook revenue down 10%. The total computing segment was down 3% from last year, and printing fared even worse, down 6%, as printing appears in secular decline.

What really caused the sell-off was management's forward guidance, which forecast non-GAAP (adjusted) earnings per share to decline from $1.04 last quarter to between $0.79 and $0.89 in the current quarter -- a decline of nearly 20%. Given that HP continues to repurchase a lot of its own shares, its earnings power in dollar terms will likely fall even more.

Consumers loaded up on PCs during the pandemic, but that segment is now in a near-term decline as some workers return to the office. However, it now appears that the corporate segment may decline, too, as macroeconomic concerns over inflation and the potential for a recession take hold. With sentiment in the tech hardware sector as bad as it can get, it's no wonder the stock sold off this week.

Now what

Warren Buffett likely bought HP because the stock is, by most key metrics, very cheap. Now it's even cheaper than when Berkshire bought in, at just a little over five times earnings.

Of course, there are some reasons the stock is cheap. The printing segment is high-margin, but is in decline as individuals and businesses print fewer documents. Moreover, while the PC industry isn't in long-term decline, it's a low-growth industry, and subject to volatility year to year.

HP is trying to garner some growth, as it recently closed the acquisition of Poly, a provider of hybrid work peripheral devices and solutions, for $3.3 billion, including debt. Poly had about $1.7 billion in revenue in fiscal 2022, and operated at a slight operating loss, but HP thinks it can derive $500 million in revenue synergies, grow revenue by 15% over the next three years, and improve margins by cross-selling Poly's products through HP's sales channels.

While HP's growth prospects appear lackluster, the company does generate solid profits and cash flow. It remains to be seen if the computing industry can find its footing, as investors don't appear to have a lot of confidence in where the bottom is at the moment.

If there is a bad recession, it would certainly hurt. However, should the PC market stabilize and management achieve the synergies it expects from Poly, HP's stock could still do well. It should definitely be on the watch lists of value investors everywhere.