HP Inc and CDW rated Citi “Neutral” on Investing.com's cautious view on PCs

Investing.com – Citi analysts downgraded HP Inc. (NYSE:) and CDW Corporation (NASDAQ:) to “neutral” from “buy” in a note on Tuesday, citing concerns about the PC market's delayed recovery in the second half of 2024.

The company's recent research into the PC ecosystem found that the expected PC refresh cycle is likely to be extended due to macroeconomic uncertainties and the expansion of Windows 10 security patches, which could drive demand recovery into 2026 and 2027.

Regarding HPQ, Citi noted that “pressure headwinds from aggressive hardware pricing continue,” while ongoing macroeconomic weakness in China could limit future positive estimate revisions.

Analysts also acknowledged the company's ongoing cost-cutting efforts, which are having a positive impact on margin and profit recovery. However, they believe that these measures will not be enough to cause a significant increase in valuation in the short term.

“While we expect continued cost-cutting efforts to support the upcoming recovery in margins and earnings, the above pressures are likely to weaken near-term valuations from historical highs,” they explained.

“We downgrade HP to Neutral from Buy due to limited near-term upside,” they wrote, maintaining a $37 price target on the stock.

As for CDW, Citi is cautious about the company's growth prospects given a “more subdued North American IT spending environment” that is likely to limit near-term estimate revisions.

While the company expects IT spending to improve through 2025, the company's focus on operating expense investments in solutions and services “could dampen operating margin leverage and EPS upside potential.”

Citi lowered its price target on CDW to $245 per share, stating: “With the stock currently trading at approximately 20x P/E CY26 EPS estimates (in line with its 5-year median), we see the current risk-reward ratio as balanced.” ”

Citi believes both HPQ and CDW have limited near-term upside due to ongoing macro headwinds and a delayed PC market recovery, which has resulted in a downgrade to neutral.