COVID-19 Life Has Been Good To PC Makers

Maybe the early days of the Covid-19 pandemic slowed down the PC sales, but as soon as working and studying from home became a part of everyday life, many businesses and people started buying PCs and other IT equipment, making the first quarter in 2021 the highest in PC unit sales since 2015. And not only that, according to the research from Gartner, this first quarter holds the highest growth rate of PC shipments to retailers and other vendors (32%) compared to the same quarter last year.

The estimate is that 69.9 million units (laptops and desktops) have been delivered in Q1 2021, and the only better first quarter was in 2015 when 71.7 million units have been shipped. So, Covid-19 life has been good to PC makers like Lenovo LNVGY, HP Inc HPQ, Dell DELL, Apple AAPL, Acer, and Asus.

Strong Market Growth

The PC sales boom that started last year is still going on. If we add the number of delivered Chromebooks (the less expensive laptops with Google operating systems, which are well accepted by schools), Gartner's estimate is that the PC market grew an incredible 47% (shipped units). Having in mind that the PC sales are historically strong, even though people are returning to offices and schools, the boom may not end yet, as the first quarters are usually a slower time for PC makers.

That means the gap in the market of semiconductors will also remain, and several industries are hit by this shortage. The auto industry in particular. Ford F, for example, produced 200.000 units less in Q1 and produced only 700.000 units in Q2, which is only 50% of the initially planned production.

Strong Stock Performance This Year By HP And Dell

Before both HP and Dell announced their quarterly earnings reports last Thursday, both companies' stock exceeded this year's performance of the two most valued companies in the market, Microsoft MSFT and Apple AAPL. While Microsoft was up by 1.23% and Apple by 1.41%, HP was up by 31% this year, and Dell 36% in the same period. The quarterly reports managed to come through and capitalize the stock performance. HP's revenues jumped 27% (year to year), while Dell's revenues went up 12% (also year to year). They both exceeded Wall Street's estimates.

Lenovo – More Profitable And Going Green

Lenovo managed to improve its position as the industry leader for PCs, with a 25.1% market share in the first quarter this year. The company's growth was higher than the market increase, making its growth the highest among the top PC sellers. The last quarter in 2020 was the best in the company's history with revenue growth of 48% (year to year) and net income growth of more than 500%. The outlook looks great in terms of growth, profit margins are getting better, and new potential in the mobile phone business looks promising.

Also, the company has been active in increasing its interest in ESG, which led to a better ESG rating (AA). Greenhouse gas emissions are reduced by more than 30% (FY 2015/16 compared to FY 2019/2020), and that will make Lenovo more attractive to more and more ESG sensitive investors.

Conclusion

Some analysts say the current PC sales market is as good as it gets. But having in mind that first quarters are usually slower for PC sellers, we should expect a good year. Of course, we must not forget the semiconductor shortage. We may hope to see less effects of this supply-demand gap in the rest of 2021, but it is more realistic to expect an issue like that will be completely solved in 2022.

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