You might never have considered owning shares of a company that’s known for making personal computers and printers. Yet, a legendary investor took a position in HP (NYSE:HPQ), so the company is certainly worth your attention. Besides, anyone who prioritizes a good value and generous dividends ought to take a look at HPQ stock.
Furthermore, it actually might not be a bad thing that HP is involved in the PC market. If that industry rebounds in 2024, HP stock could have a runway to much higher price points.
Is HPQ Stock the Perfect Warren Buffett Stock?
When Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) CEO Warren Buffet owns a stock, investors might wonder what Buffett likes about the company. Unfortunately, he rarely provides detailed explanations about why Berkshire holds a particular stock.
Still, we can make an educated guess about why Buffett’s firm would own a stake in HP stock. First of all, Buffett appreciated a good value. HP looks reasonably valued, with a GAAP-measured trailing 12-month price-to-earnings ratio of 9.1x. That’s much lower than the sector media P/E ratio of 26.85x.
Second, Buffett is happy to collect dividend distributions. HP offers a generous forward dividend yield of 3.56%, which easily surpasses the average technology-sector dividend yield of 1.025%.
Buffett wants to see evidence that a company has solid financials. HP checks that box, as the company’s fourth-quarter fiscal 2023 GAAP diluted net earnings of 97 cents per share exceeded HP’s prior guidance of 65 cents to 77 cents per share.
In addition, HP’s full fiscal 2023 GAAP diluted net EPS of $3.26 came in higher than the company’s prior outlook of $2.95 to $3.07.
HP Shareholders Should Watch for a PC-Market Rebound
As you can see, HP has some qualities that Buffett might look for, but HP probably won’t fare well in 2024 unless the PC market recovers.
The PC industry certainly wasn’t robust in 2022, but the emergence of the artificial intelligence (AI) trend offered hope of a recovery in 2023. Looking ahead to the future, HP CEO and President Enrique Lores projected that AI-compatible PCs could comprise as much as 60% of the PC market by 2027.
Plus, as InvestorPlace contributor Larry Ramer pointed out, “Research firm Canalys is predicting that PC sales will climb by 5% in Q4 and 8% in 2024.”
So, we might not have to wait until 2027 for the PC industry to rebound.
Evercore ISI analyst Amir Daryanani also envisions a PC-market recovery, which could benefit HP in the next few years.
“Incoming data points and industry comments underscore our belief that the PC market is poised for a strong recovery in calendar 2024,” Daryanani said. “Management expects to see the PC market to be growing slightly in 2024 and believes that the AI PC will double the expected market growth rate” from 2024 to 2026.
Want to Be Like Buffett? Hold HPQ Stock
HP checks multiple Buffett boxes as the company offers a decent dividend, has fairly solid financials and isn’t overvalued. Still, I’m not saying that you should buy HP stock just because Buffett’s firm owns it.
Instead, I want you to conduct your own due diligence on HP. Surely, you’ll appreciate HP’s value-and-yield combo. So, it’s mainly a question of whether you anticipate a rebound in the PC market. If so, then you’ll almost certainly want to own HPQ stock in 2024.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
