In a recent research note by Stephen Bersey, Head of Technology Research at HSBC Global Research, the future of the PC market is looking optimistic. Bersey upgraded HP stock from Hold to Buy, with a revised price target of $33, up from $30.

While HP shares experienced a 2% increase on Wednesday, reaching $28.71, they remain 4.6% lower for the year. However, Bersey sees several drivers that could propel PC demand moving forward.

Firstly, there is expected to be a refresh cycle for laptops purchased during the early stages of the pandemic. Additionally, enterprise demand is likely to receive a boost due to Microsoft's planned termination of support for Windows 10 in October 2025. Lastly, the introduction of artificial intelligence PCs from HP and other companies is anticipated to further stimulate demand in the market. Bersey believes that HP will benefit from these trends and experience expanding margins.

According to research firm Canalys, global PC shipments saw a 3% increase in the fourth quarter of 2023 following a prolonged period of year-over-year declines. This upturn in growth suggests that a refresh cycle for PCs bought during the Covid-19 pandemic and prior may be underway. Canalys predicts an 8% growth in PC shipments for 2024.

As the second-largest global PC vendor, trailing only Lenovo, HP is expected to follow sector trends closely. Bersey forecasts a 3.9% growth in HP's Personal Systems segment, which encompasses their PC business, for the fiscal year ending October 2024. Furthermore, he anticipates 6% growth for both fiscal years 2025 and 2026. Recent quarters have shown improving gross margins for HP, and Bersey expects this positive trend to continue.

With a promising outlook for the PC market and favorable growth prospects, HP Inc. is well-positioned for success in the coming years.

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