Goldman Sachs has issued a sell rating on HP Inc. (HPQ), citing persistent, long-term margin compression in the global PC market as a key concern. The firm believes structural industry shifts are undermining profitability beyond temporary demand fluctuations.
- Goldman Sachs issued a sell rating on HP Inc. (HPQ) due to secular margin compression in the PC market.
- HPQ’s gross margin fell to 34.8% in the latest quarter, down 4.2 percentage points YoY.
- Operating margin is projected to dip below 10% by 2027 under current trends.
- The downgrade reflects structural challenges, not temporary cyclical weakness.
- Peer companies like Dell (DELL) and Lenovo (0992.HK) may face similar investor scrutiny.
- Options activity shows increased put buying and hedging around HPQ in recent days.
Goldman Sachs has formally downgraded HP Inc. (HPQ) to a sell rating, signaling growing investor caution over the company's long-term profitability. The firm attributes its bearish stance to ongoing secular margin pressure within the personal computing sector, driven by intensified competition, declining average selling prices, and shifting enterprise demand patterns. Unlike cyclical downturns, these challenges reflect deeper, structural changes in hardware economics that are unlikely to reverse in the near term. HPQ’s gross margin has declined to 34.8% in the most recent quarter, a drop of 4.2 percentage points year-over-year, according to publicly reported financials. This marks the fifth consecutive quarter of margin contraction, with management acknowledging that pricing discipline remains under strain despite cost optimization initiatives. The firm projects HPQ’s operating margin could fall below 10% by 2027 if current trends persist, well below the 13.5% average seen in 2021. The sell call is expected to influence investor positioning in the broader tech hardware sector. Companies such as Dell Technologies (DELL) and Lenovo (0992.HK) may face similar scrutiny, especially those with high exposure to commercial PC sales. Institutional trading desks have already begun adjusting HPQ exposure, with options data indicating increased put volume and hedging activity in the past 48 hours. Goldman’s analysis underscores a growing consensus among equity strategists that the PC market has entered a post-peak phase, with replacement cycles flattening and cloud-centric computing reducing reliance on traditional hardware. HPQ’s reliance on a mature product segment now presents a strategic risk, particularly as it invests in sustainability and AI-driven peripherals without a commensurate revenue uplift.