Citigroup Out In Defense Of The PC Market

In a note out Wednesday morning, Citigroup analysts make the case for continued growth in the PC market, admitting it is a non-consensus call, saying "This is in contrast to the widelyheld belief that traditional PCs will go the way of the dodo following the meteoric rise of the tablet."

Their thesis is based on the following:

1. Emerging markets (EM),particular for commercials PCs, are still an area of sustainable growth
2. Tablet growth is slowing dramatically, posing less risk to PC sales
3. The headwind to CY15 growth, following a temporary demand boost from Win XP expiration, is more modest than investors believe

Other reasons Citigroup likes the PC market:

• EM Commercial PCs "Long in the Tooth"
• Less Threat from Tablets
• XP-Related Headwind Overblown

In the note, Citigroup give price targets on the following names:

Hewlett-Packard Company HPQ- $46 price target. Shares were recently up 2.5 percent at $38.27.

Western Digital Corp WDC - $110 price target. Shares were recently up 2.8 percent at $107.45.

Seagate Technology PLC STX - $70 price target. Shares were recently up 1.2 percent at $64.00.

Citigroup forecasts PC units to be at least flat in 2015, growing to +1 percent in 2016 and +2 percent in 2017. This is in contrast to the previous forecast of a 2 percent drop during the next two years. Citigroup expects emerging markets to drive the growth, more than offsetting the 1 percent to 3 percent of decline in mature markets.