PC Recovery Delayed...Again, Warns UBS

UBS’ Arthur Hsieh reduced the PC forecasts, saying that recovery had been delayed. The global PC shipment growth estimates for 2016 and 2017 have been reduced from -1.8 percent to -6.9 percent and from +0.6 percent to -1.3 percent.

“We believe OEMs were overly optimistic at the end of 2015 and were caught by unfavourable FX that in turn resulted in excess inventories,” analyst Arthur Hsieh wrote. He added that the 2018 global PC shipment estimate of 268.3m units represented 1.2 percent y/y growth, due to “a gradual recovery in the global economy and our Evidence Lab survey, which suggests ~60% of respondents plan to upgrade their PCs in the next 30 months.”

Downside From Desktops, Commercial

The desktop growth estimates for 2016 and 2017 have been reduced from -4.4 percent to -6.9 percent and from -3.0 percent to 2.6 percent. The notebook forecasts have been lowered from 0.0 percent to -6.9 percent and from 2.9 percent to -0.5 percent, respectively.

The commercial segment shipment estimates for 2016 and 2017 have been reduced from -1.6 percent to -10.8 percent and from -0.9 to -1.5 percent, respectively. Hsieh said that corporates were unlikely to upgrade PCs in the near future “given concentrated replacements in 2014 and the fact that the Vista service termination in 2017 may not be a catalyst.”

The consumer PC growth estimates for 2016 and 2017 have been lowered from -1.9 percent to -2.7 percent and from 2.2 percent to -1.1 percent, respectively.

Buy Apple, Intel, Microsoft

The analyst maintained Buy ratings for Apple Inc. AAPL [PT: $120], Intel Corporation INTC [PT: $35] and Microsoft Corporation MSFT [PT: $60]. He said that Apple could capture more PC market share due to its competitive advantages. Intel has robust data center chip growth, while Microsoft has achieved cloud momentum and could continue to offer +10 percent dividend growth over the next few years.

Sell AMD

Hsieh maintained a Sell rating for Advanced Micro Devices, Inc. AMD [PT: $1.75], expressing skepticism regarding the company’s potential to turn profitable.