Nomura's research report suggests that Lenovo Group (00992, Financial) has potential for stock price appreciation. This positive outlook is driven by the predicted enhancement in profitability of its server segment and favorable performance in its personal computer business, which has exceeded market expectations.
Lenovo's third-quarter performance is anticipated to surpass market predictions, prompting Nomura to raise its earnings forecast for the 2025 to 2026 fiscal year by 2% to 3%. Consequently, the target share price has been increased from 11 HKD to 13 HKD, while maintaining a "buy" rating.
Nomura expects Lenovo's performance in the second fiscal quarter to outperform market expectations due to several factors. Notably, Lenovo's PC shipments in China have benefited from the popularity of the game "Black Myth: Wukong." Additionally, Dell's strategic withdrawal from certain consumer PC market segments may allow Lenovo and ASUS to gain market share.
The sales of Lenovo's server business are anticipated to grow further, supported by strong general server orders and some sales from AI servers. Although there might be a current loss in the server segment, it is expected that Lenovo's server business will turn profitable in the future.
