HP Inc. HPQ shares have gained 25.8% in the past six months, outperforming the Zacks Computer - Micro Computers  industry’s, Computer and Technology sector’s and the S&P 500 index’s return of 19.9%, 15.2% and 14.9%, respectively. HPQ’s outperformance reflects investors’ confidence in the company’s innovative portfolio.

HPQ has constantly been focusing on product innovation and differentiation. The company has also extended its product line in the AI space with the launch of AI-based personal computers and laptops. Per a report by Gartner, AI-based laptops and personal computers shipment will experience year-over-year growth of 165.5% in 2025. HPQ wants to capitalize on this growth trend.

Expanding AI Portfolio Aids HPQ

So far this year, HPQ has introduced HP OmniBook Ultra Flip 14-inch Next-Gen AI PC, HP EliteBook X 14-inch Next-Gen AI PC, Z by HP Gen AI Lab, HP OmniBook X AI PC, HP EliteBook Ultra AI PC, HP OmniBook Ultra laptop and HP OmniStudio PC.

HPQ is also boosting its Printer business. This year, HPQ launched HP Print AI, the first-of-its-kind intelligent print technology that uses AI to improve the printing experiences of people at home. To give a further boost to its Printing business, HP is increasing investments in its A3 multifunction printers. These printers are designed to disrupt the traditional $55 billion A3 copier category.

The launch of AI-based products has brought HPQ on par with competitors like Dell Technologies DELL. Gartner’s most recent report reflected that PC HPQ’s shipments increased year over year by 0.3% in the third quarter of 2024. In contrast to HPQ’s marginal growth in sales of PC shipments, Dell experienced a year-over-year decrease in sales of 3.9%.

HP Inc. 6 Month Performance

Image Source: Zacks Investment Research

Competitive and Macroeconomic Headwinds for HPQ

HP faces stiff competition from other companies, including Lenovo LNVGY and Dell Technologies, which are also launching AI-based products. In the printing space, HPQ faces competitive pressure from Canon CAJPY.

Dell has numerous workstations that offer AI capabilities. These workstations are XPS 13, Inspiron 14 Plus, Inspiron 14, Latitude 7455 and Latitude 5455. Lenovo’s lineup of AI computers includes Lenovo ThinkPad X1 Carbon 10th Gen and later, Lenovo Yoga 9i and Lenovo ThinkBook Plus Gen 3.

In the printing space, Canon has integrated AI in its imagePROGRAF series of professional photo printers like the imagePROGRAF PRO-1000 to improve image production and color management. Increased competition in these arenas has resulted in market saturation, which is hurting HPQ growth.

Rising macro uncertainties and price sensitivity among customers are undermining the company’s high-margin Printing business. The challenging macroeconomic environment and protracted inflationary conditions do not bode well for HP’s overall prospects.

What Should Investors Do?

Although HPQ is introducing innovative AI-based products that have long-term growth prospects, the current macroeconomic scenario and competitive pressure are likely to hurt HP’s near-term financial performance. The Zacks Consensus Estimate for HPQ’s fiscal 2024 revenues is pegged at $53.46 billion, indicating a 0.6% decline from the year-ago quarter.

Considering all these factors, we suggest investors to stay away from this Zacks Rank #4 (Sell) stock at present.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

HP Inc. (HPQ) : Free Stock Analysis Report

Dell Technologies Inc. (DELL) : Free Stock Analysis Report

Lenovo Group Ltd. (LNVGY) : Free Stock Analysis Report

Canon, Inc. (CAJPY) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research