PC Market Outlook Post-Pandemic

While PC demand boomed during the pandemic, the outsize demand could not be sustained, and shipments have declined steadily for the last two years on a year-over-year basis. However, there are positive signs indicating a change in conditions.

Earnings Reports Awaited

Investors are eagerly anticipating the January quarter earnings reports from HPInc. on Wednesday and Dell Technologies on Thursday. Analysts like Amit Daryanani from Evercore ISI are optimistic about the upcoming news, recently adding both HP and Dell stocks to the firm’s “tactical outperform” list.

Growth Forecasted for 2024

Market research firms Gartner and IDC estimate that the PC market will see newfound growth in 2024. This prediction is based on several factors, including a refresh cycle for PCs purchased during the pandemic, an uptick in enterprise PC purchases ahead of Microsoft’s 2025 termination of support for Windows 10, and the introduction of “AI PCs” in the second half of 2024.

Lenovo Reports Positive Results

Lenovo Group, the largest PC manufacturer globally, reported a 3% overall revenue growth with a notable 6.7% increase in its intelligent devices group. Particularly encouraging was the 20% year-over-year PC revenue growth in the North American market.

Outlook from Lenovo Executive

Matthew Zielinski, Executive VP and President of International Markets at Lenovo, highlighted the company’s success in various market segments. Zielinski noted strength in the public sector, small-and-medium-sized businesses, and a resurgence in large enterprise purchases, indicating a positive trend in the market.

Analyst Projects Strong Earnings Growth for HP in Fiscal Year 2024

Financial analyst Daryanani has voiced confidence in HP’s ability to achieve significant earnings-per-share growth for the fiscal year ending in October 2024. Pointing to various factors such as operational discipline, potential upside from PCs in the second half, stock buybacks, and the promising outlook for the printer-supplies business, he believes the company is well-positioned for success.

Projections for HP

In the upcoming January quarter, HP anticipates adjusted profits per share to fall within the range of 76 cents to 86 cents. Looking ahead to fiscal 2024, the company has set a target of adjusted profits ranging from $3.25 to $3.65 per share, along with projected free cash flow between $3.1 billion and $3.6 billion. Daryanani even suggests that these figures could potentially be underestimated. With high hopes for HP’s future performance, he maintains an Outperform rating on the company’s stock, setting a target price of $40.

Dell’s Diverse Growth Opportunities Beyond PCs

While Dell is often associated with personal computers, Daryanani emphasizes that the company’s growth prospects extend beyond this segment. He highlights the possibility of AI-related server demand driving positive outcomes, especially with sufficient access to GPUs. Additionally, Daryanani points out the increasing attention on Dell’s role as an enterprise IT infrastructure and services provider, positioning itself as a viable alternative to industry stalwart Cisco.

Dell’s Projections and Market Response

Dell has provided guidance for the January quarter, forecasting revenue between $21.5 billion and $22.5 billion, alongside adjusted profits of $1.70 per share. Following this update, Dell’s stock experienced a 4.6% increase to reach $91.79 on Friday morning, while HP saw a more modest uptick, climbing 0.5% to $29.09.