Lenovo Group Ltd. shares
jumped in early trade on Monday, as investors shrugged off the latest drop in the Chinese technology giant’s quarterly profit and looked forward to an expected rebound later in the year. The stock has gained as much as 7.2% and was last up 5.3% at 7.14 Hong Kong dollars (US$0.91).
The rally came after Lenovo, the world’s largest personal-computer maker, on Friday posted a 32% profit drop for its fiscal third quarter, as PC sales fell amid weak consumer spending and declining electronics demand globally. The bottom-line decline was narrower than some analysts’ expectations. The company’s chief executive, in an interview with The Wall Street Journal on Friday, guided for resumed industry-wide sales growth from the second half of 2023, which would support Lenovo’s earnings rebound. Global PC sales volume fell 16% last year, the sector’s worst sales drop in over a decade, according to market research company Canalys. Analysts also pointed to the relative resilience in Lenovo’s non-PC businesses, including server and IT-solutions operations. “Server and solutions would remain as the bright spots, helping to mitigate PC weakness,” Citi analysts said in a note. The two segments both delivered record-high profits during the October-December quarter. “We think further downside could be limited, and a potential demand stabilization and margin recovery from 2H 2023 would serve as positive catalysts,” the Citi analysts said.