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4 Computer Stocks to Buy on New IDC Forecast

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On May 25, IDC released its latest report on PC market expectations for 2021. The forecast is extremely encouraging (to put it mildly). IDC expects 2021 PC shipments to increase 18.1% despite the ongoing chip shortage.

For context, it’s worth noting that despite the expected 2.9% decline in 2022, the 5-year CAGR still comes to +3.0%. So for a market that has been going soft for a number of years and for a number of reasons, this looks super.

The PC market has been troubled in recent years, first because of increasingly capable mobile phones that can handle a lot of the connectivity needs that consumers earlier needed PCs for; and second (and more recently), the market was seeing CPU shortages because of issues at Intel (INTC - Free Report) , which impacted overall supply.

As things stand now, PC channel inventories worldwide are still well below historical levels and we are still in the middle of a massive chip shortage. IDC’s report says that the components currently in short supply are lower-priced things like notebook panel driver ICs, audio codecs, sensors and power management ICs (PMICs). Mario Morales, program vice president, Semiconductors, says that these “shortages will begin to ease by the end of Q3 this year. A broader upstream balance of the industry is not expected until the first half of 2022."

As PC sales pick up, the consumer segment will be the strongest, followed by education and then commercial (driven by the great reopening). It’s also expected that limited stock will drive some consumers to buy desktops instead of notebooks.

The industry is also expected to see secular increase in demand stemming from increased use of PCs for gaming and content consumption.

Given all of the above, the following components of the Zacks Computer - Mini computers industry (top 3% of Zacks-classified industries) look rather attractive-

Apple Inc. (AAPL - Free Report)

Cupertino, CA-based Apple’s business still runs around its flagship iPhone although diversification efforts remain in full swing. That’s why, today, the Services portfolio, including revenues from cloud, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services have grown into the second largest piece. iPads and MacBooks, although great products, make a relatively small contribution to total revenue.

Apple dominates the Wearables and Hearables markets with a growing presence in the related personal health monitoring space due to the increasing adoption of its Watch and AirPods. But this segment also makes a relatively small contribution.

The shares carry a Zacks Rank #2 (Buy) and Growth Score B. The company is expected to grow revenue and earnings a respective 28.6% and 55.5% this year and a respective 4.8% and 3.6% the following year.

Considering Apple’s size and the large base this growth is coming off, this is stupendous. In the last 30 days, the current-year Zacks Consensus EPS Estimate increased 13.3% while the 2022 estimate increased 12.1%.

HP Inc. (HPQ - Free Report)

Palo Alto, CA-based HP Inc. was formed upon the November 2015 split of Hewlett-Packard Company into two publicly traded entities - Hewlett Packard Enterprise Company and HP Inc. It is the leading global provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions and services to individual consumers, SMBs and large enterprises, including customers in the government, health and education sectors.

This Zacks Rank #2 stock has a Value Score A, Growth Score A, Momentum Score B and VGM Score A. It is expected to grow revenue and earnings a respective 11.4% and 46.5% this year.

Revenues are currently expected to decline 1.2% the following year although earnings will increase 1.2%. The Zacks Consensus Estimates for 2021 and 2022 are up 4 cents and 2 cents, respectively in the last 60 days.  

Lenovo Group Ltd. (LNVGY - Free Report)

Based in Quarry Bay, Hong Kong, Lenovo Group Limited constitutes the former IBM Personal Computing Division. Its product lines include Think-branded commercial PCs and Idea-branded consumer PCs, as well as servers, workstations, and a family of mobile internet devices, including tablets and smart phones.

Lenovo's business is built on product innovation, a highly-efficient global supply chain and strong strategic execution. Its major research centers are in Yamato, Japan; Beijing, Shanghai and Shenzhen, China; and Raleigh, North Carolina.

Lenovo shares also carry a Zacks Rank #2. It has got an A for Value, Growth and Momentum. The company’s year ends in March. Accordingly, it grew revenue and earnings by a respective 19.8% and 71.0% in 2021.

For the year ending March 2022, the company’s revenue and earnings are expected to grow 9.0% and 10.2%, respectively. The 2022 estimate is up 5.0% in the last 30 days. It’s worth keeping in mind that unlike the others, Lenovo has just one analyst providing estimates.

3D Systems Corp. (DDD - Free Report)

Headquartered in Rock Hill, SC, 3D Systems is a leading provider of 3D content-to-print solutions including 3D printers, print materials, on-demand custom parts services and 3D authoring solutions for professionals and consumers, worldwide. It also provides scanners for a variety of medical and mechanical X-Ray film digital archiving.

The company caters to a broad range of industries, including automotive, aerospace, computer, electronic, defense, education, consumer, energy and healthcare, across OEM, government agency, education, independent service bureau and individual consumers.

3D Systems shares carry a Zacks Rank #2, Growth Score A and Momentum Score B. The company is expected to grow revenue 5.8% this year and 6.4% in the next. It is expected to grow earnings 436.4% this year and 11.4% in the next. The current year EPS is up 48% in the last 30 days while the next year EPS is up 13.9%.

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