HP Reiterates FY2026 Guidance at Morgan Stanley Conference Amid Persistent Memory Cost Headwinds

What happened

HP Inc. presented at the Morgan Stanley Technology, Media & Telecom Conference, likely reaffirming its FY2026 non-GAAP EPS guidance of $2.90–$3.20 and Q1 outlook of $0.73–$0.81 despite ongoing memory inflation and tariff pressures. Management discussed mitigation strategies, such as supplier requalification and pricing actions, to offset DRAM/NAND cost hikes expected to impact margins in the second half of FY2026. The presentation emphasized progress on the Fiscal 2026 Plan, targeting ~$300M in savings this year through headcount reductions and operational efficiencies. However, the interim CEO transition adds execution risk, with investors scrutinizing whether cost savings can materialize without disrupting strategic priorities. The conference underscored that HP's ability to pass through input costs without demand destruction remains the critical unresolved variable for near-term earnings durability.

Implication

HP's conference presentation reinforces the WAIT rating, as reiterated guidance does not address the core uncertainty of price-elasticity under memory inflation, leaving the stock's cheap valuation (P/E ~7.1x) vulnerable to EPS cuts. The emphasis on cost-saving initiatives is positive but execution-dependent, with the interim CEO transition potentially delaying strategic decisions or exacerbating operational volatility. Near-term, focus should be on Q1 FY2026 results by May 2026 to verify non-GAAP EPS stays within $0.73–$0.81 and early restructuring savings track toward the ~$300M target. A failure to hold FY2026 EPS above $2.90 would signal deeper margin erosion, likely driving the stock toward the bear case $18, while sustained execution could support a re-rate toward the base case $21. External memory price trends, such as persistent DRAM tightness, will remain a key monitorable, as HP's filings explicitly link 2H FY2026 profitability to successful cost pass-through.

Thesis delta

The conference presentation does not shift the investment thesis; it confirms that memory cost mitigation and restructuring execution are the primary near-term drivers, aligning with the DeepValue report's WAIT rating. Management's reiteration of guidance offers no new data to alter the probability-weighted scenarios, but underscores the need for vigilance on pricing actions and savings milestones in the coming quarters. Investors should maintain a patient stance, as the thesis hinges on observable proof from Q1 and Q2 results before any rating change.