HP Inc. stock has seen gains of about 8% over the last week, outperforming its peer Dell Technologies stock, which has declined about 18% over the same period. However, looking at a longer period, HP stock has gained about 17% year-to-date, compared to Dell stock which remains up by over 80% over the same period. Looking at a slightly longer period, HPQ stock has shown gains of 40% from levels of $25 in early January 2021 to around $35 now, while DELL stock has seen solid gains of 80% from levels of $75 in early January 2021 to around $135 now. However, both stocks have underperformed the S&P 500 over two out of the last three years.
HP reported better-than-expected Q2 FY’24 results driven by signs of recovery in the PC business. Enterprises and consumers are looking to upgrade their personal computers to deploy more artificial intelligence applications, which could increase PC sales volumes for HP. Revenue for HP’s personal systems business grew by 3% year-over-year in Q2, compared to a -4% decline in Q1. Margins for the PC business also improved, with operating margins coming in at 6%, up 60 basis points compared to last year. On the other hand, Dell’s April Q1 FY’25 results were better than expected, and the company raised its full-year revenue outlook. However, there are concerns about Dell’s AI server business, as the margins for the business may not be very high.
Despite the recent setback for Dell, it might be the better long-term pick compared to HPQ. HPQ trades at just about 10x projected 2024 earnings, with revenue growth expected to remain flat this year due to concerns about its printing business. Sales for HP’s printing business have been on the decline, posing a long-term threat to the company’s valuation. On the other hand, Dell Technologies stock trades at 17.5x forward earnings, with stronger growth projected at high single-digit levels over the next two years, led by PC and server sales.
The Trefis High-Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the last three years. HQ Portfolio stocks provided better returns with less risk compared to the benchmark index, showing less volatility in performance metrics. While both HP and Dell compete in the IT and computer hardware space, there are reasons for the divergence in their recent performance. HP’s PC business has shown signs of recovery, driven by the increasing demand for AI-capable chipsets in personal computers. Dell, on the other hand, has concerns about its AI server business not yet being accretive to profitability.
Investors are closely watching both HP Inc. and Dell Technologies to assess their long-term potential in the information technology and computer hardware sector. While HP has shown recent gains and improved performance in its PC business, Dell’s AI server business is causing some concerns among investors. With HP trading at a lower valuation but facing challenges in its printing business, and Dell trading at a higher multiple but showing stronger growth potential, the future outlook for these two tech giants remains uncertain.
