Shares of PC and printer maker HP (HPQ 2.01%) fell today, down as much as 4.8% at one point before recovering to a 4.1% decline as of 1:50 p.m. ET.
Back when the old Hewlett-Packard split in two, HP retained the legacy, low-growth businesses of PCs and traditional ink printers.
While some had hoped for a late-year boost thanks to the advent of the "AI PC," one analyst wrote today that the refresh might not be coming until next year, or even beyond.
Key Data Points
Citi downgrades HP on delayed PC refreshes
Today, Citigroup sell-side analyst Asiya Merchant downgraded HP from buy to neutral while leaving her price target of $37 unchanged. HP stock began the day at $35.87, so the stock had already come close to her target. That meant the analyst likely needed to raise her target to keep a buy rating, or downgrade shares to neutral.
In her note, Merchant cast a dour outlook on the entire PC sector, writing, "Recent checks in the PC ecosystem suggest the near-term PC refresh opportunity remains protracted, given macro uncertainty."
Many had hoped that the unveiling of AI-enabled PCs this year combined with the Federal Reserve's recent interest rate cuts would spur more PC refreshes. After all, PCs have been in a post-pandemic slump for more than two years now. Merchant does think the refresh is coming, but said the more likely time frame was 2026/2027.
Why the delay? Well, there are still a number of uncertainties out there, including today's tensions in the Middle East, as well as looming U.S. elections. Second, interest rates are still elevated relative to the pandemic and pre-pandemic periods. And AI data center spending may be crowding out other IT spend for corporations in 2024, leaving the PC refresh until next year at least.
But a big refresh is likely coming
The 2026/2027 time frame may be a bit too conservative, especially as the Windows 10 end-of-support deadline is October of 2025. Additionally, new AI PC chips are just hitting the market, with potential buyers assessing the offerings. Therefore, this downgrade may be correct in the near term, but might be wrong by next year. It still appears as though AI-enabled devices should be a positive for the industry in 2025 and beyond.
