HP (HPQ) is drawing fresh attention after partnering with Asurion to launch HP Care Complete, a subscription based device protection and support offering that is now available to U.S. customers across PCs and connected home devices.

HP shares have gained momentum recently, with a 30 day share price return of 23.62% and a 90 day share price return of 36.71%, while the 1 year total shareholder return sits at 18.91%.

If this shift toward services and device protection has your attention, it can be useful to see how other hardware focused companies are positioned within the 55 AI infrastructure stocks

HP now has a fresh services story and a stock that has already moved. The key issue for investors is whether the current share price fairly reflects this shift or already incorporates most of the potential upside.

Most Popular Narrative: 30.7% Overvalued

HP last closed at $29.94, while the most followed narrative suggests a fair value of $22.91 using a 9.76% discount rate and flat overall revenue assumptions.

Analysts are assuming HP's revenue will remain fairly flat over the next 3 years. Analysts assume that profit margins will increase from 4.4% today to 4.6% in 3 years time.

Want to understand why a modest margin shift still supports that fair value gap for HP? The narrative focuses on disciplined earnings growth, steady revenue and a future earnings multiple that differs from what the broader tech sector currently commands.

Result: Fair Value of $22.91 (OVERVALUED)

However, HP still faces pressure from structurally weaker print demand and intense PC price competition, which could squeeze margins and challenge the current overvaluation narrative.

Another View on HP’s Valuation

While the most popular HP narrative points to a 30.7% premium to fair value, the SWS DCF model points in the opposite direction. At $29.94, HP is described as trading about 31.9% below an estimated future cash flow value of $43.98, which raises a very different question for investors.

Next Steps

With HP pulling in different views on valuation, it makes sense to check the underlying data yourself and move quickly to form your own stance. A useful place to start is by weighing the 3 key rewards and 3 important warning signs.

Looking for more investment ideas beyond HP?

If HP has you thinking more seriously about portfolio upgrades, do not stop here. The strongest opportunities often show up where fewer investors are already looking.

• Target potential mispricing by scanning companies that combine quality fundamentals with attractive valuations through the 52 high quality undervalued stocks.
• Build steadier income potential by focusing on businesses screened as 12 dividend fortresses.
• Strengthen your downside protection by reviewing companies identified in the 78 resilient stocks with low risk scores.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.