Chicago, IL – October 19, 2021 – Today, Zacks Equity Research discusses Mini-Computers, including HP Inc. ( HPQ - Free Report) , Apple Inc. ( AAPL - Free Report) and 3D Systems Corporation ( DDD - Free Report) .
Coronavirus outbreak has been beneficial for the Zacks Computer – Mini Computers industry as it raised demand for PCs and tablets significantly. Despite massive supply chain disruption, the ongoing work-from-home and online learning wave have been beneficial for industry participants like HP, Apple and 3D Systems.
Strong demand for high-end laptops and smartphones, particularly the availability of 5G-supported iPhones, has been a key catalyst. Further, the launch of foldable as well as AI and ML-infused smartphones, tablets, wearables and hearables is a major growth driver for the industry participants. However, industry-wide components supply constraints might impact PC, smartphone and printer sales in the near term.
The Zacks Computer – Mini Computers industry comprises prominent companies like Apple and HP that offer smartphones, desktops, laptops, printers, wearables and 3-D printers. Such devices are based either on Apple’s iOS, MacOS, iPadOS, WatchOS, Microsoft Windows, or on Google Chrome and Android operating systems.
They predominantly use processors from Apple, Intel, AMD, Qualcomm, NVIDIA, Samsung, Broadcom, and MediaTek. Expanding screen size, better display and enhanced storage capabilities have been key catalysts driving the rapid proliferation of smartphones. This has been well-supported by faster mobile processors from the likes of Qualcomm, NVIDIA, Apple and Samsung.
Bring Your Own Device (BYOD) Aids Momentum : The industry is benefiting from the rapid adoption of BYOD in workplaces. Enterprises practicing BYOD allow employees to use their personal devices, including mobiles, laptops and tablets, for work purposes. BYOD helps in bridging communication gaps between remote workers and desk-bound employees, thereby improving process management and workflow.
Moreover, BYOD has proved more productive as it lowers training time. The coronavirus-induced remote working and online learning model bode well for industry participants as demand is expected to increase for desktops and laptops.
Impressive Formfactor Drives Demand : Expanding screen size, better display and enhanced storage capabilities have been key catalysts driving the rapid proliferation of smartphones and tablets. This has been well-supported by faster mobile processors from the likes of Qualcomm (Snapdragon-branded), NVIDIA (Tegra X1), Apple (A14 Bionic) and Samsung (Exynos 9609).
Moreover, improved Internet penetration and speed along with the evolution of mobile apps have made smartphones indispensable for consumers. Further, the improved graphics quality is making smartphones suitable for playing games like PUBG and Fortnite. This is expected to boost demand for high-end smartphones and open up significant opportunities for device makers.
PCs Face Extinction Risk : Personal computers (desktops and laptops), be it Windows or Apple’s MacOS-based, have been facing the risk of extinction due to the rapid proliferation of smartphones and tablets. Stiff competition from smartphones has compelled global PC makers to not only upgrade hardware frequently but also add apps and cloud-based services to attract consumers. Nevertheless, the emergence of 5G, AI, machine learning and foldable computers is likely to be the key catalyst in expanding the total addressable market (TAM) of the PCs.
The Zacks Computer – Mini Computers industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #30, which places it in the top 12% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group’s earnings growth potential. Since Oct 31, 2020, the industry’s earnings estimates for 2021 have moved up 38.2%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
The Zacks Computer – Mini Computers industry has underperformed the broader Zacks Computer And Technology sector as well as the SP 500 Index over the past year.
The industry has increased 26.2% over this period compared with the SP 500’s increase of 32.2% and the broader sector’s rally of 35.7%.
On the basis of forward 12-month P/E, which is a commonly used multiple for valuing computer stocks, we see that the industry is currently trading at 24.15X compared with the SP 500’s 21.29X. However, it is below the sector’s forward-12-month P/E of 27.97X.
Over the last five years, the industry has traded as high as 32.32X, as low as 11.49X and at the median of 15.76X.
HP: This Zacks Rank #1 (Strong Buy) company is benefiting from solid demand for PCs amid the pandemic-led remote-working and online-learning wave. You can see the complete list of today’s Zacks #1 Rank stocks here.
Furthermore, stringent cost control measures are expected to drive margin over the long run. Moreover, HP’s expectation of returning at least $1.5 billion to shareholders in the fourth quarter is encouraging.
The Zacks Consensus Estimates for fiscal 2021 earnings has risen 6.9% to $3.74 per share over the past 60 days. The stock has rallied 46.1% in the past year.
Apple: This Zacks Rank #3 company is benefiting from continued momentum in the Services segment, driven by App Store, Cloud Services, Music, advertising and AppleCare. Apple’s near-term prospects are bright, driven by new iPhones that support 5G, revamped iPad and Mac line-up of devices, healthcare-focused Apple Watch, and an expanding App Store ecosystem. Apple’s ability to attract small developers has been a key catalyst. Moreover, Apple devices continue to gain traction among enterprises.
Apple currently has more than 700 million paid subscribers across its Services portfolio. The App Store continues to draw the attention of prominent developers worldwide, helping the company offer appealing new apps that drive App Store traffic. Further, a growing number of AI-infused apps will attract more subscribers to the App Store.
The Zacks Consensus Estimate for fiscal 2022 earnings stayed at $5.59 per share over the past 60 days. The stock has risen 24.9% in the past year.
3D Systems – This Zacks Rank #3 company is benefiting from robust healthcare performance driven by strong dental and medical applications end-market. Moreover, rebound in customer activity following pandemic-related shutdowns is a positive.
Cost structure by trimming cost of sales and operating expenses will boost margins over the long run. Moreover, the strategic move of selling Cimatron and GibbsCAM software businesses will help 3D Systems utilize its resources on more profitable additive manufacturing parts.
The consensus mark for fiscal 2021 earnings has declined by a penny to 39 cents per share over the past 60 days. The stock has risen 276% in the past year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The SP 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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