11:20 AM EDT, 08/19/2024 (MT Newswires) -- HP (HPQ) likely faces limited earnings and valuation upside, with catalysts "largely priced in" and second-half personal computer demand trending "a bit weaker" than previously forecast, Morgan Stanley said in a note Monday.

The PC maker is scheduled to release its fiscal Q3 results on Aug. 28. Morgan Stanley expects non-GAAP earnings of $0.85 per share on revenue of $13.38 billion, which it said were "effectively in-line" with market expectations. For fiscal Q4, the brokerage projects non-GAAP EPS at $0.93 on revenue of $13.9 billion, roughly 3% below consensus estimates, according to a note.

Morgan Stanley said its recent supply chain checks indicate "a slightly weaker" second-half PC market outlook than previously envisaged amid factors such as "benign" consumer PC and back-to-school demand and limited visibility into year-end demand trends.

The firm said it expects HP's PC business fundamentals to continue to improve over the course of the next 12 months. However, with the company's stock outperforming all of its PC original equipment manufacturer peers but Dell Technologies ( DELL ) year-to-date, "we believe now is a time to take profits," Morgan Stanley said.

The firm downgraded its rating on the HP stock to equal-weight from overweight while maintaining its $37 price target.

The company's shares were down 3.6% in recent trading.

Price: 34.64, Change: -1.28, Percent Change: -3.55