The performance of the computer hardware sector was a mixed bag in 2020. A slowdown in office-equipment spending during the pandemic has hurt digital hardware sellers. Because many offices were and continue to be closed in response to lockdown regimes, there has been limited demand for printers, workstations, and desktops. However, rising demand based on remote working, video gaming, and virtual learning is driving demand for laptops and desktops higher, buoying the industry in the interim ahead of a full recovery.
Over the past decade, consumers have become enamored with iPhones and Android devices. But, in 2020 the focus shifted to larger devices. According to research firm Canalys, by the year’s end 2021 installed PCs and tablets will grow to 1.77 billion, from 1.64 billion in 2019. Analysts also cite supply issues in catering to potentially surging demand this year. Companies that manufacture computers with advanced cameras, video conferencing speakers, cellular chips, and 5G adaptability will likely steal the show this year, they predict.
Shares of leading computer hardware producers like Apple Inc. (AAPL), Dell Technologies Inc. (DELL), HP Inc. (HPQ), and Lenovo Group Limited (LNVGY) experienced an enviable rally in 2020, and their momentum is likely to increase this year. These four companies are competing to launch the most advanced computing devices and tap the unmet market demand.
Apple Inc. (AAPL)
AAPL is a global technology behemoth involved in designing, manufacturing, and marketing personal computers, smartphones, tablets, and wearables. Mac, a line of personal computers, and iPad, a line of multi-utility tablets, are AAPL’s leading computer offerings.
AAPL analyst Ming-Chi Kuo has stated that in 2021 MacBook Pro is likely to undergo its first significant upgrade in five years. According to Kuo, the new MacBooks will be available in 14-inch and 16-inch sizes and will feature the company’s own processing unit rather than Intel’s (INTC) CPU. The new MacBooks will have squared-off edges on the top and bottom, inspired by the iPad Pro and newer iPhone 12 design.
During the fourth quarter ended September 26, AAPL’s net sales rose 1% year-over-year to $64.7 billion. Net sales for the Mac and iPad segment surged 29.2% and 46%, respectively. At $9 billion, the sales for Mac were an all-time high. EPS for the quarter fell to $0.73 from $0.76 posted in the same period last year.
The Street estimates revenue for the quarter ended December 31, 2020 to be $102.6 billion, indicating a 16% increase year-over-year. Meanwhile, its EPS is likely to rise 12% to $1.40.
APPL has rallied 60.4% in the past year to close yesterday’s trading session at $132.03. The stock has climbed 32.7% during the past six months.
How does AAPL stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Industry Rank
A for Overall POWR Rating
The stock is ranked #1 of 52 stocks in the Technology – Hardware Industry.
Dell Technologies Inc. (DELL)
DELL is the world’s leading manufacturer and marketer of IT hardware, software, and services solutions. Infrastructure Solutions Group (ISG), Client Solutions Group (CSG), and VMware are its three segments. DELL’s CSG segment includes desktops, notebooks, and workstations; displays and projectors.
DELL has launched new desktops and laptops that cater to working-from-home professionals. These products include the 5G-powered ‘Latitude 9420’ that features built-in speakerphone and camera enhancements for automatic light correction and background blur. The company claims that the new laptop will be the first one to leverage Intel’s Visual Sensing technology and offer auto-wake and lock features.
During the third quarter ended October 30, 2020, DEEL’s total net revenue climbed 2.8% year-over-year to $23.5 million, led by unparalleled demand for remote work and learning solutions. The company saw a 14% year-over-year rise in its Consumer segment sales. It reported strong performance, with double-digit revenue growth in Latitude and Precision notebooks and triple-digit revenue growth in commercial Chromebooks. Its EPS for the quarter surged to $1.08 from $0.66 posted in the same period last year. To tap opportunities in growing markets, DELL intends to accelerate its as-a-service strategy and hybrid cloud capabilities.
Analysts expect revenue for the quarter ending January 31, 2021 to rise 1.4% year-over-year to $24.5 billion. Meanwhile, EPS for the quarter is likely to expand 6.5% to $2.13.
DELL ended yesterday’s trading session at $77.05, gaining 48.7% over the past year. Over the past six months, the stock rallied 24%.
DELL is rated “Strong Buy” with an “A” for Trade Grade and Buy & Hold Grade and Industry Rank, and a “B” for Peer Grade. It is currently ranked #4 of 52 stocks in the Technology – Hardware Industry.
HP Inc. (HPQ)
HPQ offers personal computing and other access devices as well as imaging and printing products. The three segments in which the computer manufacturer operates are Personal Systems, Printing, and Corporate Investments. The Personal Systems segment sells commercial and consumer desktop and notebook, personal computers, and workstations. Its Printing segment offers consumer and commercial printer hardware and supplies.
At the CES 2021, HPQ launched its new lineup, which includes HP Envy 14, HP Elite Folio, and HP Elite Wireless Earbuds. The HP Envy 14 features Nvidia’s (NVDA) GeForce GTX 1650Ti graphics card and an 11th-gen Intel Core i5 chip. Meanwhile, HP’s newest earbuds also offer automatic presets for sound situations as well as standard features like noise cancellation and audio tuning.
HPQ’s net revenue during the fourth quarter ended October 31, 2020 declined 1% year-over-year to $15.3 billion, while its EPS surged 88% to $0.49. The company’s Personal Systems revenue was flat at $10.4 billion, while Printing revenue fell 3% over the previous year. In terms of unit sales, Notebooks climbed 25%, while desktop units declined 31%.
The consensus revenue estimate for the quarter ending January 31, 2021 is $15 billion, representing a 2.5% year-over-year increase. Its EPS is expected to rise 10.7% per annum for the next five years.
HPQ ended yesterday’s trading session at $25.20, surging 14.4% over the past year. Over the past six months, the stock surged 43.3%.
HPQ’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade and Industry Rank, and a “B” for Peer Grade. The stock is ranked #9 of 52 stocks in the Technology – Hardware industry
Lenovo Group Limited (LNVGY)
LNVGY is a Hong Kong-based manufacturer and seller of commercial and consumer personal computers, servers, workstations and mobile Internet devices. The company also sells laptops, desktops, phones, accessories, monitors, and ultrabooks.
At CES 2021, LNVGY launched three new models, namely IdeaPad 5G, IdeaPad 5 Pro, and IdeaPad 5i Pro. These laptops have the latest 11th-gen Intel Core processors and the new AMD Ryzen 5000 mobile chipsets alongside an improved Alexa voice assistant experience.
During the second quarter ended September 30, 2020, LNVGY’s revenue rose 7% year-over-year to $14.5 billion. The company’s revenue for its PC and Smart Devices Group (PCSD) climbed 8% year-over-year to $11.5 billion. LNVGY’s net income surged 53% to $310 million.
Analysts expect revenue for the quarter ended December 31, 2020 to rise 5.8% year-over-year to $14.9 Billion. Its EPS for the quarter is likely to rise 95.1% to $0.80.
LNVGY ended yesterday’s trading session at $23.35, climbing 48.6% over the past year. During the past six months, the stock surged 90.8%.
LNVGY is rated “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is currently ranked #14 of 52 stocks in the Technology – Hardware Industry.
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AAPL shares were trading at $136.10 per share on Thursday afternoon, up $4.07 (+3.08%). Year-to-date, AAPL has gained 2.57%, versus a 2.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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