Key Takeaways:
- UBS raised Lenovo's target to HKD26 from HKD18, maintaining Neutral
- ISG revenue accelerated to 45% YoY in June, AI servers at 20%
- PC shipments fell 5% YoY as device growth slowed to 11%
Back
Lenovo target raised to HKD26 as UBS flags AI server growth at 45%
UBS raised Lenovo Group's target price to HKD26 from HKD18, citing 45% Infrastructure Solutions Group revenue growth driven by AI servers.
"ISG revenue growth accelerated to 45% YoY in June, with AI servers comprising nearly 20% of the segment's business," UBS said in a research report.
UBS raised its fiscal 2027 and 2028 revenue forecasts by 3% each to USD95.8 billion and USD106.6 billion, respectively. The broker expects ISG to maintain 43% YoY growth in fiscal 2027, while Solutions and Services Group growth is projected at 20%. Device business growth is expected to slow to 5%.
The upgrade signals Lenovo's AI infrastructure push is gaining traction even as its core PC business softens. Lenovo shares rose 2.2% on the day, with the stock trading at 13x projected fiscal 2028 earnings under the new target.
UBS adjusted its EPS forecasts for fiscal 2027 and fiscal 2028 to HKD0.5 and HKD2, respectively, reflecting stronger ISG sales and profitability as well as warrant-related expenses. The Intelligent Devices Group grew 11% YoY, with PC shipments declining 5% YoY to 16.7 million units. Operating margin for IDG was maintained at nearly 7%, supported by higher average selling prices and previously purchased low-cost inventory.
The guidance raise suggests Lenovo's AI server momentum will continue to offset weakness in the PC market. Investors will watch the company's fiscal Q1 results for further margin details on the ISG segment.
This article is for informational purposes only and does not constitute investment advice.
