On Thursday, Morgan Stanley reinstated protection on Lenovo Group (OTC:) Ltd. (992:HK) (OTC: LNVGY), assigning an Equalweight ranking with a value goal of HK$9.70. The agency anticipates the upcoming analyst assembly on February 22 to doubtlessly function a catalyst for the corporate’s share value. The main target will likely be on Lenovo’s monetary outcomes for the third fiscal quarter of 2024 and the primary calendar quarter of 2023, in addition to the full-year 2025 steering.

The agency fashions a web revenue of roughly $235 million for the fourth fiscal quarter of 2024 and the primary calendar quarter of 2023, which is 17% beneath the consensus. This estimate displays a downward adjustment as a result of weakened PC demand noticed since November of the earlier 12 months.

Moreover, Morgan Stanley foresees potential draw back dangers to the consensus earnings estimates for fiscal 12 months 2025, attributing this to restricted progress within the complete addressable marketplace for PCs and low penetration of AI PCs for the 12 months. Consequently, they estimate a web revenue of round $1,263 million for FY2025, which is 16% beneath the consensus.

Morgan Stanley outlines three eventualities relating to Lenovo’s forthcoming steering. Within the first state of affairs, if web revenue steering for the fourth fiscal quarter and first calendar quarter falls between $200 million and $225 million and the full-year 2025 web revenue steering is beneath Morgan Stanley’s estimate, Lenovo’s share value might lower by 5-10%.

The second state of affairs suggests a steering vary of $225 million to $250 million for web revenue, aligning with the agency’s expectations for FY2025, which might result in a 0-5% decline in share value. The third state of affairs posits a web revenue steering above Morgan Stanley’s estimate, between $250 million and $275 million, which might lead to a 0-5% enhance in Lenovo’s share value.

Morgan Stanley has assigned a 60% chance to the second state of affairs, anticipating Lenovo to information web revenue for the fourth fiscal quarter and the primary calendar quarter throughout the $225 million to $250 million vary, with FY2025 web revenue steering doubtless beneath consensus expectations. The agency’s base case displays a cautious outlook on Lenovo’s efficiency and market situations for the upcoming 12 months.

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