HP Inc. was downgraded to Sell on Monday. Analysts said the company’s recent stock rally rests on temporary tailwinds.
Revenue in HP’s PC division rose 18% year over year. Unit volumes fell by double digits, while operating margins contracted by 80 basis points. Analysts said the divergence suggests growth is being driven by price increases rather than underlying demand.
HP’s highly profitable printing segment is also under pressure. An accelerating long-term decline and rising price competition could erode the company’s primary source of cash flow.
Analysts expect the PC industry to contract next year and said the positive outlook may already be priced into HP shares. They recommended that investors consider taking profits.