HP Printer and Ink Margins Could Improve

HP stock could benefit from higher profit margin for its printer and cartridge business.
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HP (HP) - Get Report stock could benefit from higher profit margin for its printer and cartridge business. Trefis members have created forecasts for two key drivers of HP over the last week: (1) Printer and Cartridges EBITDA Margin and (2) HP Market Share in the printer market. The member forecasts suggest that Printer and Cartridges EBITDA Margin will trend above the Trefis forecast, while HP Market Share will trend in line with the estimates of the in-house team of analysts at Trefis.

HP competes with

Dell

(DELL) - Get Report

and

Lexmark

(LXK)

in the printers and ink cartridges market. We currently have a Trefis price estimate of $54 for HP's stock, about 28% above the current market price of around $41.

We estimate that Printers and Ink Cartridges constitute around 26% of HP's stock. Hence the stock is quite sensitive to (1) Printer and Cartridges EBITDA Margin and (2) HP Market Share. Below are charts showing recent estimates created by Trefis members for the two drivers in detail.

1. Printer and Cartridges EBITDA Margin

The average of Trefis member forecasts for Printer and Cartridges EBITDA Margin indicates an increase from around 23% in 2010 to around 24% by 2016, compared to a flat baseline Trefis estimate of close to 22% over the Trefis forecast period. The member estimates imply an upside of 4% to the Trefis price estimate for HP's stock. In the past, Printer and Cartridges EBITDA Margin has increased from 16.5% in 2005 to around 22% in 2009.

Disagree? You can drag the forecast trend-line above to express your own view, and see the sensitivity of HP's stock to Printer and Cartridges EBITDA Margin.

Our

complete analysis for Printer and Cartridges EBITDA Margin is here.

2. HP Market Share

The average of Trefis member forecasts for HP's Market Share in printers are in line with our forecast. The baseline Trefis estimate projects an increase from 41% in 2010 to around 42% by the end of the Trefis forecast period. In the past, HP Market Share has increased from 33.5% in 2004 to 40% in 2009.

Disagree? You can drag the forecast trend-line above to express your own view, and see the sensitivity of HP's stock to HP Market Share.

Our

complete analysis for HP's stock is here.

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