Shares of HP Inc. (HPQ) slid about 7% on Monday, due to a rating downgrade by Morgan Stanley analyst Erik Woodring, to Sell from Hold, citing risks from a “supercycle” of rising memory chip prices that are likely to hurt margins. The analyst also slashed the price target to $24 (5% upside potential) from $26.
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He noted that while HP continues to benefit from a stronger-than-expected PC refresh cycle, rising memory costs are squeezing margins. This resulted in a downward revision of FY26 earnings estimates by 9%, to $2.98 per share.
Other hardware stocks, such as Dell (DELL) and Hewlett-Packard Enterprise (HPE), were also down today due to similar concerns highlighted in the Morgan Stanley report.
Margin Pressure and Valuation
The downgrade comes amid concerns about hardware makers facing cost inflation and slowing demand in certain segments. Woodring highlighted that HP’s gross and operating margins could fall by 70 to 90 basis points.
Also, the new valuation of 8 times forward earnings indicates that the stock may not rise much more unless profit margins improve.
Is HPQ a Good Stock to Buy?
Turning to Wall Street, HPQ stock has a Moderate Buy consensus rating based on one Buy, nine Holds, and two Sells assigned in the last three months. At $27.92, the average HP stock price target implies a 22.08% upside potential.
