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Dell Technologies (NYSE:DELL) and HP Inc. (NYSE:HPQ) are slated to report quarterly results next week and Morgan Stanley said believes the releases will show “green shoots” in the PC market, but the rest of the hardware space is a big question mark.
Analyst Erik Woodring, who has an overweight rating on Dell (DELL) and an equal-weight rating on HP (HPQ), said recent checks suggest that hardware demand has remained “muted” through the end of July, as customers are dealing with older hardware in favor of more mission critical projects. However, it looks as if the PC industry is starting to rebound, after the post COVID lull.
“In our view, PCs remain the lone hardware market where there are emerging green shoots, as [second-quarter] shipments outperformed expectations, [third-quarter] builds are being revised higher, and checks suggest signs of stability in public and large SMB/small enterprise customers in C2Q,” Woodring wrote in an investor note.
On the other hand, Woodring noted that server and storage demand is still below expectations, though he believes the weakness is likely coming from small and medium-sized businesses. There are also signs that the server market is “likely closer to bottoming” than the storage market, suggesting some choppiness ahead.
Lastly, the printer market is still losing ground, as shipments fell low-double digits year-over-year in the calendar second-quarter, down 15 points from the first-quarter, Woodring explained.
“When we add this all up, we believe it suggests both DELL and HPQ will report [year-over-year] declines in the July quarter largely in-line with Street expectations, and guide to Q/Q revenue and EPS growth for the October quarter, partially reflective of typical seasonal patterns, but a welcome improvement after several quarters of sequential declines,” Woodring added.
A consensus of analysts expect Dell (DELL) will earn $1.14 per share on $20.84B in revenue, while HP (HPQ) is expected to earn 86 cents per share on $13.4B in sales.
