On May 25, IDC released its latest report on PC market expectations for 2021. The forecast is extremely encouraging (to say the least). IDC expects PC shipments in 2021 to increase 18.1% despite the chip shortage.
For context, it should be noted that despite the expected decline of 2.9% in 2022, the 5-year CAGR still reaches + 3.0%. So for a market that has been slowing down for a number of years and for a number of reasons, that sounds great.
The PC market has been troubled in recent years, first due to increasingly high-performance mobile phones capable of handling much of the connectivity needs that consumers previously needed computers; and second (and more recently) the market was experiencing processor shortages due to issues at Intel INTC, which impacted the overall supply.
As it is, PC channel inventories around the world are still well below historic levels and we are still in the midst of a massive chip shortage. IDC report says components currently in short supply are cheaper items such as laptop panel driver ICs, audio codecs, sensors, and power management integrated circuits (PMICs) . Mario Morales, vice president of the program, Semiconductors, said that “these shortages will start to ease by the end of the third quarter of this year. A broader upstream industry equilibrium is not expected until the first half of 2022. “
With the resumption of PC sales, the consumer segment will be the strongest, followed by education and then commercial (driven by the grand reopening). Limited stocks are also expected to lead some consumers to buy desktops rather than laptops.
The industry is also expected to experience a secular increase in demand stemming from the increased use of PCs for gaming and content consumption.
Considering all of the above, the following components of Zacks Computer Industry – Mini Computers (3% of industries ranked by Zacks) looks rather appealing.
Apple Inc. AAPL
Apple’s business, based in Cupertino, Calif., Still revolves around its flagship iPhone, although diversification efforts continue to be in full swing. This is why today the service portfolio, including revenue from Cloud, App Store, Apple Music, AppleCare, Apple Pay and Licensing and Other Services, has become the second most important element. IPads and MacBooks, although excellent products, contribute relatively little to total sales.
Apple dominates the wearable device and wearable device markets with a growing presence in the related personal health monitoring space due to the growing adoption of its watch and AirPods. But this segment also makes a relatively small contribution.
The shares carry a Zacks rank 2 (buy) and a B growth score. The company is expected to increase sales and profits by 28.6% and 55.5% respectively this year and by 4.8% respectively. and 3.6% the following year.
Considering the size of Apple and the large basis for that growth, that’s great. Over the past 30 days, Zacks’ consensus EPS estimate for the current year has risen 13.3%, while the 2022 estimate has risen 12.1%.
HP Inc. HPQ
HP Inc., based in Palo Alto, Calif., Was formed during the November 2015 split of Hewlett-Packard Company into two publicly traded entities – Hewlett Packard Enterprise Company and HP Inc. and Printing Products , as well as related technologies, solutions and services for individuals, SMEs and large enterprises, including clients in the government, health and education sectors.
This Zacks # 2 rank stock has an A value score, A growth score, Momentum B score, and VGM A score. Revenue and profit are expected to increase by 11.4 respectively. % and 46.5% this year.
Revenues are currently expected to decline by 1.2% the following year, although revenues increase by 1.2%. Zacks’ consensus estimates for 2021 and 2022 have risen by 4 cents and 2 cents, respectively in the past 60 days.
Lenovo Group Ltd. LNVGY
Based in Quarry Bay, Hong Kong, Lenovo Group Limited is the former IBM Personal Computing division. Its product lines include Think-branded commercial PCs and Idea-branded consumer PCs, as well as servers, workstations and a family of mobile Internet devices, including tablets and smartphones.
Lenovo’s business is built on product innovation, a highly efficient global supply chain and strong strategic execution. Its main research centers are in Yamato, Japan; Beijing, Shanghai and Shenzhen, China; and Raleigh, North Carolina.
Lenovo shares also carry a Zacks # 2 rank. It has an A for value, growth and momentum. The company’s year ends in March. As a result, it increased its revenue and profits by 19.8% and 71.0% respectively in 2021.
For the year ending March 2022, the company’s revenue and profits are expected to increase by 9.0% and 10.2% respectively. The 2022 estimate is up 5.0% over the past 30 days. It should be borne in mind that unlike the others, Lenovo only has one analyst providing estimates.
3D Systems Corp. DDD
Headquartered in Rock Hill, SC, 3D Systems is a leading provider of 3D printable content solutions, including 3D printers, printing materials, on-demand custom parts services, and 3D creation for professionals and consumers, all over the world. It also provides scanners for a variety of digital archiving of medical and mechanical x-ray films.
The company caters to a wide range of industries, including automotive, aerospace, IT, electronics, defense, education, consumer, energy and healthcare, across OEMs, government agencies, education, independent service bureaus and individuals.
3D Systems shares have a Zacks No.2 Rank, Growth A Score and Momentum B Score. The company is expected to increase revenue by 5.8% this year and 6.4% next. Profits are expected to rise 436.4% this year and 11.4% next. Current year’s EPS is up 48% in the past 30 days, while next year’s EPS is up 13.9%.
Price movement since the start of the year
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