HP (HPQ) has drawn fresh attention after agreeing to integrate OpenAI’s Frontier platform across its business, with the goal of applying AI to customer interactions, device telemetry, and internal workflows at enterprise scale.

Recent moves in HP’s share price help frame this AI news in context. A 1 day share price return of 3.1% and a 90 day share price return of 21.4% contrast with a 1 year total shareholder return that has declined 6.2%. This suggests momentum has picked up in the short term even as longer term holders have seen weaker outcomes.

If this OpenAI partnership has you thinking about where else AI is gaining traction, it could be worth reviewing a curated list of 29 AI small caps as a next step.

HP’s OpenAI deal arrives just as the stock trades only slightly below the average analyst target, yet it sits at a far steeper implied discount to estimated intrinsic value. Is the market’s caution around HP still warranted?

Most Popular Narrative: 140% Undervalued

HP's most followed narrative estimates a fair value of $22.91 compared with a last close of $22.60. This suggests only a modest gap between model and market while still framing the stock as materially undervalued on longer term cash flow assumptions.

Persistent structural cost reduction initiatives, including manufacturing diversification outside China, AI enabled automation, and a $2B annualized savings target, are described as drivers of sustainable improvements in net margins and bottom line earnings resilience.

HP's focus on responsible innovation and sustainability, exemplified by significant recycled content in devices and advances toward net zero, is presented as aligning with growing enterprise and consumer preference for eco friendly technology, potentially strengthening competitive positioning and supporting revenue and margin performance over the long term.

Want to see what sits behind that valuation gap for HP? The narrative leans on steady revenue assumptions, firmer margins, and a future earnings multiple that materially reshapes the implied upside.

Result: Fair Value of $22.91 (UNDERVALUED)

However, HP's reliance on structurally pressured print markets and ongoing margin strain from higher memory and component costs could still challenge that undervalued narrative.

Next Steps

With HP's mix of AI potential, structural pressures, and valuation debate in mind, do not wait for consensus to form. Review both the upside and the concerns by checking the 2 key rewards and 4 important warning signs

Looking for more investment ideas beyond HP?

If HP’s story has you thinking bigger about your portfolio, do not sit on it. Use this momentum to size up other opportunities that match your goals.

• Target long term compounding potential by scanning a focused set of 41 high quality undervalued stocks that combine quality profiles with pricing that may not fully reflect their fundamentals.
• Strengthen your income stream by zeroing in on 8 dividend fortresses built around higher yielding companies that still clear key balance sheet and payout checks.
• Dial back portfolio stress by reviewing 74 resilient stocks with low risk scores that score well on resilience and can help you stay invested when conditions feel uncomfortable.

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.