Morgan Stanley raised its Lenovo Group target price 35% to HK$46, keeping an Overweight rating after the company's infrastructure division nearly doubled revenue. The broker raised its fiscal 2027 ISG revenue forecast 28 percent to US$43.7 billion, 56 percent above market expectations.
Morgan Stanley raised its Lenovo Group target price 35% to HK$46, keeping an Overweight rating after the company's infrastructure division nearly doubled revenue.
"Lenovo's first fiscal quarter results were way above expectations," Morgan Stanley said in a note, citing Infrastructure Solutions Group revenue that nearly doubled year on year while operating margin expanded to 9.1 percent. Management confirmed this represents a structural profitability benchmark rather than a one-off, the broker said.
The broker raised its fiscal 2027 ISG revenue forecast 28 percent to US$43.7 billion, 56 percent above market expectations, and expects ISG operating margin to hold around 9 percent. Goldman Sachs separately lifted its Lenovo target price 64.5 percent to HK$51 in one move, citing solid server demand and PC growth outperforming peers.
Lenovo reported record first-quarter revenue of US$26.9 billion, up 43 percent year on year, with adjusted net income up 176 percent to US$1.1 billion. ISG revenue reached US$8.5 billion, up 98 percent, with operating profit of US$777 million. The AI server pipeline expanded to US$54 billion, up 157 percent quarter on quarter, while AI-related revenue grew 60 percent to US$9.3 billion, now 35 percent of group sales.
The Intelligent Devices Group, which includes PCs and smartphones, generated US$17.1 billion in revenue, up 27 percent, while Solutions and Services Group reached US$2.9 billion, up 28 percent. Lenovo's global PC market share reached 24.2 percent, extending its lead over the No. 2 vendor for a 10th consecutive quarter. The reported net loss of US$609 million reflected a US$1.7 billion non-cash fair value loss from warrant revaluation, the company said.
The broker said Lenovo's continued achievement of ISG targets will support valuation re-rating. Lenovo's Hong Kong-listed shares rose as much as 22 percent on the results, while its US-listed ADR closed at US$73.77, up 1.79 percent. Management said it is on track to reach its US$100 billion revenue target within the current fiscal year, ahead of its earlier two-year timeline, with a longer-term goal of US$130 billion and net margin above 5 percent.
The results also lifted sector peers, with Hewlett Packard Enterprise shares rising more than 8 percent and Dell and HP Inc. gaining in pre-market trading on read-through demand for AI infrastructure. The target price raises from both bulge-bracket brokers reflect strong buy-side conviction in Lenovo's AI infrastructure growth. Investors will watch ISG's margin trajectory and the conversion of the US$54 billion AI server pipeline into revenue in coming quarters.
This article is for informational purposes only and does not constitute investment advice.
