💻 Is HP Facing A Silicon Roadblock?

AMC's wild ride continues, United Airlines goes shopping!

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Thursday’s Close) 4,192.85 -15.27 (0.36%)

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🔥 Top Movers

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AMC -20.40%

💻 Hewlett-Packard: The Silicon Roadblock In HP’s Way?

Hewlett-Packard (HPQ) comfortably beat consensus estimates for the second quarter. Yet, the company’s guidance for what to expect didn’t have the clarity analysts were looking for. No surprise the stock tanked in response, and is slowly finding its footing. (Tweet This)

Of PCs And Printers

David Packard, one of the founders of HP wrote the all-time classic The HP Way. The best-selling book highlighted ways to manage and motivate employees which have become part of management folklore. HP Way became part of the company’s culture – its approach to managing human resources.

Since then, HP has faced the full brunt of market forces, withstood competition, and managed to carve its place in the PC and peripherals market. Today, HP is probably better known for its printers rather than its laptops or notebooks.

By acquiring Compaq in 2001, HP looked to accelerate the growth of its PC business. Be it a desktop or laptop or tablet, demand for HP’s products continued to shoot up over time in line with the global PC market. Global shipments of PCs in Q1 2021 stood at 69.9M units, an increase of 32% Y-o-Y.

Supply Chain Conundrum

With work-from-home becoming the norm over the past year, demand for laptops and other computing products has only increased and this reflects in the Q2 financials reported by HP.

Key Stats For Q2:

Revenue: $15.9B Vs $15B expected

EPS: $0.93 Vs $0.89 expected

Are those travails a thing of the past? For Q3, HP expects EPS of $0.83, higher than analyst expectations of $0.75. However, despite robust demand, the company did not provide revenue guidance, neither for the current quarter, nor for 2021.

The first three months of 2021 saw HP making its biggest recovery in the Latin American region, recording a 60% Y-o-Y growth. While that growth seems too good to be true, it comes on the back of a significant decline during the same period in 2020, as people adjusted to the initial lockdown. The semiconductor shortage only added to the strain.

The company also warned it does not have enough semiconductor supply to keep up with the robust demand. Supply chain constraints are also amplified due to the rise of Covid-19 in many parts of South and Southeast Asia.

All said and done, while the company was fairly optimistic in the medium-term, it couldn’t pinpoint its expected numbers in the current quarter against analysts’ estimate of $15.3B in revenue. This left analysts scratching their heads about HP’s way forward.

Market Reaction
HPQ ended the day at $29.93, up 0.5%. The stock dropped 9% when Q2 results were announced last week.

Company Snapshot 📈

HPQ $62.55 +0.15 (0.50%)

Analyst Ratings (17 Analysts) BUY 47%  HOLD 29%  SELL 24%

Newsworthy 📰

Boost: Broadcom forecasts upbeat current-quarter sales on 5G ramp up (AVGO -1.89%)

Out Shopping: United Airlines will buy 15 ultrafast airplanes from start-up Boom Supersonic (UAL -4.25%)

New Versions: Apple working on iPad Pro with wireless charging, New IPad Mini (AAPL -1.22%)

Later Today 🕒

  • Hooker Furniture Corp Earnings (HOFT)
  • Garmin Ltd. Annual General Meeting
  • 6:00 PM IST: Nonfarm Payrolls Data
  • 7:30 PM IST: Factory Orders

Fun Fact of The Day 🌞

The brand Coca-Cola makes that many different products that if you decided to consume a different one every day it would take you a whole 9 years to try all of them!

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