Goldman Sachs lowered its target price for Lenovo Group (00992) to HK$7.3 from HK$7.5 and maintained its "buy" rating.
Lenovo shares dropped by 6% yesterday despite reporting an in-line FY1Q 2020 (CY2Q 2019) result. The research house attributed the share-price decline to (1) GM in FY1Q 2020 was strong at 16.4% but supported by memory price decreases, implying GM could drop in FY2Q 2020 and onward.
In addition, Datacenter, Lenovo's previous strong growth was driven by a low base and strong market growth, implying slower growth going forward. ASP decrease with low-end models for India education project (ELCOT) suggests the company's ASP increase trajectory could be near its ceiling. Soft currencies in Latin America to hurt end-market consumption power.
Meanwhile, trade war impact has been among the main investor concerns on Lenovo, especially post the US government's earlier announced 10% tariff on the remaining US$300bn of imports from China, which include PC and smartphones, starting from September.
Factoring in the results and guidance, Goldman cut its EPS forecasts by 6%/6%/12% in FY2020-22.
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