David Einhorn mentioned pc {hardware} maker HP may finally profit from AI.
HP will seemingly see “high-teens progress” within the years forward, he mentioned.
He mentioned HP inventory buying and selling round 10x earnings seems to be “very cheap.”
Famed hedge fund investor David Einhorn is eyeing a tech inventory that could possibly be an under-the-radar synthetic intelligence play.
The Greenlight Capital founder mentioned his agency is not essentially within the components of the market the place investor enthusiasm is highest. As a substitute, his fund is betting on extra reasonably priced names which may be positioned to learn from AI down the street.
One among these names is pc {hardware} agency HP, Einhorn advised Bloomberg TV.
“PCs are due for a daily substitute cycle, as a result of loads had been purchased after COVID in 2020, and 2021, and we may have a greater than regular cycle if ‘AI PCs’ change into a factor,” Einhorn mentioned.
HP is up over 20% year-to-date, buying and selling at $36.21 per share as of two p.m. ET on Thursday.
Einhorn mentioned he sees the corporate on tempo for accelerated progress over the following few years. The inventory is buying and selling 10 occasions earnings, pays a dividend yield of over 3%, and spends 100% of free money stream paying shareholders, he mentioned. Buyback yield is round 7%.
“So we see mid-teens, high-teens progress for the following couple of years, simply as you undergo a cycle share depend discount, and so for this you are paying simply 10 occasions earnings — which could be very cheap from our perspective,” Einhorn outlined.
Extra outstanding AI performs are much less alluring because the market has develop into more and more costly, he mentioned.
Einhorn made the same argument in Greenlight’s newest quarterly letter to traders, saying that the tech sector’s “nosebleed valuations” have made the market more and more dangerous.
“I feel the market as a complete is admittedly fairly costly, contemplating we’re in a robust a part of the financial cycle and we’re about 23 occasions earnings,” he advised Bloomberg. “So it is onerous for me, as any person who truly pays plenty of consideration to what I pay for issues, to wish to chase these issues.”
Away from AI area, Einhorn mentioned that the health tools firm Peloton seems to be considerably undervalued. After he made the argument on the Robin Hood Buyers Convention on Wednesday, the inventory spiked 11% that day.
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