This report is part of an equity research on HP Inc. which aims to analyse the
company and give a recommendation on whether it is a good investment
opportunity, based on our DCF and relative valuation. This dissertation focuses
on the current macroeconomic context and its effects on HP, HP’s Printing
segment, the company’s capital structure and cost of equity, and the relative
valuation.
The Covid-19 pandemic accelerated the digitalisation of the world and
increased the demand for notebooks, but decreased the use of hardcopy printers.
In addition, it disrupted supply chains and created a shortage of semiconductors,
significantly impacting technology firms. Finally, the high energy and fossil
fuels inflation, resulting from the Russia-Ukraine conflict, increased general
production costs and, more directly, supplies in the Printing segment. HP has
an extremely strong position in the consolidated hardcopy printers market, but
we forecast this market to decline significantly. However, the 3D printers
market is on the rise and we expected it to have a powerful growth. This is a
more competitive market, but HP’s investment should grant it a valuable market
share.
Adding to our analysis of the personal systems segment, the rest of HP’s
operations, and our estimated cost of capital, the DCF valuation led us to a share
price of $29.09 as of December 31st, 2023, and a return of 6.50%. The relative
valuation confirmed the accuracy of this stock price. Thus, our final
recommendation is for investors to hold their HP stock positio
