We recently compiled the list of the 15 Best Hardware Stocks According To Goldman Sachs using the latest sentiment data. In this article, we are going to take a look at where HP Inc. (NYSE:HPQ) stands against the other hardware stocks.
The soaring popularity of artificial intelligence for consumer and business applications has injected fresh life into the computing industry. If we’re to rewind the hands of time and go back to 2022, the stock market environment was considerably different from what it is now. All major technology stocks, including those that are responsible for making chips that power AI workloads were down by double digit percentages in the wake of breakneck inflation and rising interest rates.
Fast forward to 2024 and the rise in valuations seems to have no end in sight. One bank that’s quite optimistic about artificial intelligence is Goldman. Goldman’s analyst teams are among the best in the world, and they spend countless hours analyzing stocks and industries for the right set of picks that could disrupt the industry.
On this front, Goldman came out with a note recently that outlined a new beginning for the computer hardware industry. According to the bank, the introduction of AI has necessitated a global shift to new hardware that can support the technology. In its note, the bank’s analysts shared:
During the pandemic, the tech hardware industry peaked as the majority of work-from-home employees purchased equipment. The space currently has fully unwind this cycle and we notice stocks like HPQ trading at 9x their 2025 earnings estimates.
Most PCs purchased during the pandemic are expected to be replaced soon. We expect discernable new features of AI, enhanced security, and stronger computational power in upcoming PC and mobile device models, incentivizing the US consumer to spend more on newer equipment than historically, creating an unusually stronger cycle.
Goldman also created a basket of stocks where the highest weighted stock has an 8% weight and there are 20 stocks in the basket. According to Goldman analyst Faris Mourad:
The basket is composed of technology hardware stocks that may benefit from PC and mobile device renovations that could include AI features. The basket can trade up to $250m in one day with no name exceeding 10% of ADV.
Considering this optimism, we decided to take a look at the top Goldman’s top 15 hardware stock picks.
Our Methodology
To make our list of the top Goldman Sachs hardware stocks, we used the top holdings of the bank’s PC & Mobile Device AI Upgrades basket (GSXUPCAI).
For these hardware stocks, we also mentioned hedge fund investors. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
3. HP Inc. (NYSE:HPQ)
Number of Hedge Fund Shareholders In Q1 2024: 46
HP Inc. (NYSE:HPQ) is HP’s personal computing division that sells computers and printers. The firm’s recent earnings performance has left much to be desired as it has beaten adjusted analyst EPS estimates in just one of its four latest quarters. However, TD Cowen slightly increased the share price target to $32 from $30 in May 2024 and kept a Hold rating on the shares. Explaining its decision, the firm outlined that HP Inc. (NYSE:HPQ)’s AI PCs are sold at higher prices, and the PC maker also stands to benefit from users refreshing their Windows computers and starting to get their hands on the latest AI products.
Like its enterprise counterparts, HP Inc. (NYSE:HPQ)’s forward price to earnings ratio of 10.55 implies that investors expect it to grow slowly than the broader market. As we mentioned above, Goldman Sachs think that the market is wrong and HPQ is a cheap stock. Greenlight Capital mentioned the firm in its Q1 2024 investor letter. Here is what the firm said:
The title of our Sohn presentation was “Solve AI,” which was a play on Solvay’s corporate name. Nonetheless, we established another new long position that actually stands to benefit from AI, which we believe is not reflected in the current stock price. HP Inc. (HPQ) sells computers, printers and adjacent products and supplies. We established an initial position at an average price of $30.76 per share, which is about 9x current year earnings estimates. Recent results reflect a two-and-a-half-year cyclical downturn in demand for computers, which followed a mini-boom driven by COVID and related demand for equipment to work-from- home. We believe that we are, at a minimum, on the cusp of a normal PC refresh cycle, which should drive earnings above estimates. HPQ has committed to return 100% of free cash flow to shareholders through buybacks and dividends. The shares have a 3.6% dividend yield and we estimate HPQ has the capacity to buy back 25-30% of the outstanding shares over the next three years.
. . . .While we have spoken with experts that are divided between being enthusiastic and skeptical of an AI PC cycle, we don’t believe any of the optimism is currently reflected in the share price. HPQ ended the quarter at $30.22 per share.
Overall, HPQ ranks 3rd among the 15 best hardware stocks to buy according to famed investment bank. You can visit the 15 Best Hardware Stocks According To Goldman to see the other hardware stocks. While we acknowledge the potential of HPQ as an AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HPQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. The article was originally published at Insider Monkey.