Lenovo Shares Price Slump as Near Term Outlook Muted
By Tracy Qu
Lenovo shares are sharply lower in Hong Kong on skepticism about the world's largest PC maker's near-term growth outlook, even though its third-quarter results were better than expected.
Shares dropped 6.6% to 8.26 Hong Kong dollars (US$1.06) at midday Friday. On Thursday, the company said its third-quarter net profit fell 23% compared with the same period a year earlier to US$337 million and attributed the fall to a high base of comparison. However, revenue rose 3% on year to US$15.7 billion, increasing for the first time in two years.
Lenovo's near-term outlook remains muted, Citi analysts Carrie Liu and Michael Hung said in a research note.
Noting the weakness in its servers business, "which was mostly impacted by a slowdown in general-purpose server demand and limited AI offering," Citi also said management had indicated there could be a delay in PC purchases by enterprise customers in the first half of this year, which could weigh on Lenovo's near-term momentum.
Citi cut its stock target price to HK$10.50 from HK$10.90, but kept its buy rating, saying that it believed in the company's long-term outlook.
Senior Credit Analyst Trung Nguyen of Lucror Analytics, who publishes on Smartkarma, said that the company's third-quarter results were encouraging with a further improvement from the quarter before.
"The strong balance sheet, sound liquidity, and solid working capital management should cushion Lenovo from the PC segment's inventory adjustment period," the analyst said.
Write to Tracy Qu at tracy.qu@wsj.com
(END) Dow Jones Newswires
February 22, 2024 23:57 ET (04:57 GMT)
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