Hook / Thesis
HP Inc. is a strange, useful commodity right now: the business still generates recurring cash from PCs and printers, management is returning capital aggressively, and the stock sits near its cycle lows at roughly $19.4 as of 02/03/2026. That combination - steady operating cash + visible shareholder returns - creates an asymmetric trade. If HP's cash returns continue and the market re-rates a lower-risk earnings stream, the stock can re-trace a large portion of the prior move down to the low $20s and beyond. If not, downside exists and must be respected with a disciplined stop.
This is a trade idea, not a long-term thesis: buy into a near-term mean reversion plus dividend yield, size the position for downside risk, and watch the company's 02/24/2026 earnings release as the primary catalyst.
What the company does and why the market should care
HP Inc. is a longtime incumbent in PCs and printing. After exiting enterprise infrastructure in 2015, it focused on client computing and print. It outsources manufacturing and sells globally through channels; only about one third of revenue comes from the U.S. The market cares because the company still produces material operating income and free cash flow even though the PC market is cyclical. That cash can be returned to shareholders - via dividends and financing outflows that look like buybacks - which supports EPS and provides an income cushion for investors trading a rebound.
Operationally the company is not flashy, but it is big: recent quarterly revenues are in the ~13.2-13.9 billion range, gross profit north of $2.7B per quarter, and operating income measured in the mid-to-high hundreds of millions. Those are real numbers that underpin a large dividend and substantial financing activity.
Financial snapshot - the numbers that matter to this trade
- Most recent quarter (Q3 fiscal 2025, period ended 07/31/2025): revenues $13.932B; operating income $716M; net income $763M; diluted average shares ~954M; diluted EPS $0.80.
- Prior two quarters (Q1 and Q2 fiscal 2025): revenues $13.504B (Q1) and $13.22B (Q2); operating income $845M (Q1) and $654M (Q2). The last three quarters add to roughly $1.734B of reported net income (Q1+Q2+Q3 = $565M + $406M + $763M = $1.734B), demonstrating a material earnings base even through a cyclical environment.
- Cash returns: the most recent quarter shows net cash flow from financing activities of -$1.537B (continuing operations), a clear financing outflow. That aligns with a company returning cash to shareholders (dividends + buybacks likely).
- Dividends: HP declared a $0.30 quarterly dividend on 01/27/2026 (pay date 04/01/2026). Annualized at $1.20, that implies an approximate yield of ~6.2% at the current price (~$19.39).
- Balance sheet signals: inventory remains elevated (inventory reported at $8.356B in the latest quarter) while liabilities are substantial (total liabilities ~$40.76B). Equity attributable to parent is reported as slightly negative (-$901M) in the latest quarter - an accounting outcome that warrants monitoring but does not on its own prevent the company from generating cash or paying dividends.
- Estimated market capitalization: using the most recent diluted average share count (~954M shares) and last trade price ($19.39), implied market cap is roughly $18.5B (19.39 * 954M ≈ $18.5B). Enterprise value is harder to pin from the data (cash and consolidated debt line items are not presented cleanly in the dataset), so this trade focuses on equity returns and yield rather than EV multiples.
Why this creates a trade
Two mechanics drive the idea: (1) management is a visible capital-return machine. The quarter showed a financing cash outflow (-$1.537B) consistent with buybacks/dividends and management comment activity historically. (2) The stock is trading near cycle lows after a sustained move from mid-$30s into the high teens over the last year. At these prices the dividend yield is eye-catching (~6%+), which attracts income-minded buyers and forces valuation buyers to consider buyback-driven EPS support.
Put another way: if HP continues to remove shares and maintain the dividend, the EPS floor is higher and the market tends to re-rate the stock upward even if revenue growth is sluggish.
Trade plan (actionable)
Trade: Long HPQ (ticker HPQ)
Entry: 19.00 - 19.75 (look to scale in; current last trade ~19.38 on 02/03/2026)
Initial stop: 16.50 (absolute stop to limit downside ~15-16% from entry band)
Target 1: 24.00 (near prior support/resistance cluster in mid-$20s)
Target 2: 30.00 (extension target if margins stabilize or buybacks/earnings catalyst surprise)
Time horizon: Swing-to-position (6-12 weeks for T1; 3-6 months to T2)
Position sizing: risk no more than 1-2% of portfolio on initial stop (adjust size accordingly)
Risk level: Medium (cyclical business with structural cash returns)
Rationale: Target 1 captures mean reversion toward the stock's recent trading cluster in the mid-$20s where buyers previously stepped in. Target 2 is a more aggressive re-rating if HP prints earnings that show margin stabilization, continued financing outflows, or management upsizes returns. The stop at $16.50 respects the recent low-volatility support region and limits exposure to deeper deterioration in PC demand or a dividend cut.
Catalysts to watch
- 02/24/2026 earnings release and call - this is the immediate catalyst; look for guidance on buybacks/dividend policy and commentary on inventory and demand.
- Announcements from CES follow-up or product ramps - HP highlighted "Intelligent Work"/AI PC offerings at CES 01/05/2026; tangible commercial traction could shift forward demand.
- Continued financing outflows reported in the cash flow statement (quarterly) signaling sustained buybacks - a repeat of -$1.537B would support EPS per share even with flat revenue.
- Macro support for PC refresh cycles (enterprise buying, AI client upgrades) that improves revenue mix or margin mix.
Risks and counterarguments
Every trade here is asymmetric but not risk-free. The following are the primary failure modes; I list them explicitly and give the counterargument that cuts both ways.
- Secular weakness in the PC market - If corporate and consumer PC upgrades continue to soften, revenue and gross profit can decline. That would pressure margins and make the yield look like a value trap. Counterargument: even in soft cycles HP generates hundreds of millions of operating income and can use buybacks to stabilize EPS, but this only works if cash flow remains positive.
- Inventory overhang - Inventory was reported at $8.356B in the most recent quarter; if HP is stuck clearing channel inventory it will need to take price or margin actions. That creates a risk to near-term earnings and multiples. Counterargument: HP's scale and channel relationships mean it can manage clearance tactically, but it may take a quarter or two.
- Balance-sheet complexity and negative reported equity - Reported equity attributable to parent was negative (-$901M) in the latest quarter. Negative equity signals large liabilities relative to assets and can spook investors; it could limit the company's perceived flexibility. Counterargument: negative book equity is often an accounting outcome for companies that do large buybacks and generate strong cash returns; the operative metric for this trade is cash generation and financing flows, not book equity.
- Dividend cut or buyback pause - If management cuts the dividend or stops buybacks, the main support for a low-valuation, high-yield thesis evaporates and the stock is likely to re-price lower quickly. Counterargument: management has signaled returns historically and a cut would most likely come with disclosure and an accelerated sell-off, which is why the stop is essential.
- Macro/credit shock - A broad risk-off or credit event could knock down cyclicals and high-yield equities irrespective of company-specific fundamentals. Counterargument: dividend yield can provide a floor in normal risk-off rallies, but not in systemic crises.
What would change my mind
I would abandon the long if one of the following occurs:
- Management explicitly pauses buybacks or cuts the dividend - that removes the structural support for EPS and yield-based valuation.
- Earnings guidance materially misses with clear signs of demand deterioration across commercial clients (not just temporary channel noise).
- Working capital deteriorates further (inventory rising materially above current levels quarter-after-quarter) without a credible remediation plan.
Final stance
I like HP from a trade perspective at current levels: the stock trades at cycle lows, pays an attractive cash yield (~6.2% annualized based on the 01/27/2026 dividend), and the company is demonstrably returning cash to shareholders (financing outflows of -$1.537B in the most recent quarter). Entry in the $19.00-19.75 band with a stop at $16.50 provides a defined risk while keeping upside to $24 and $30. This is a medium-risk, income-plus-mean-reversion trade; size accordingly and watch the 02/24/2026 earnings release closely. If HP confirms continued returns and shows inventory normalization, the risk/reward looks attractive; if management retreats from returns or guidance deteriorates materially, exit as planned.
Disclosure: This is not financial advice. The trade plan above is an analyst's actionable idea based on the company's recent financials and market data; each investor must size positions and manage risk consistent with their own portfolio and constraints.
Key near-term date: Earnings announcement expected 02/24/2026. Dividend declared 01/27/2026 (quarterly $0.30)