BofA is Bearish on PCs But Likes Apple’s Prospects

Global PC shipments fell 11.1% year-over-year in the second quarter, the biggest annual decline since Q2 2013.

After booming through much of the covid pandemic, the personal computer industry is dropping back to earth.

Global PC shipments fell 11.1% year-over-year in the second quarter to 71.2 million units, the biggest annual decline since the second quarter of 2013, according to Counterpoint data.

And Bank of America analysts aren’t looking for a recovery any time soon. “Our view is that PCs were about 10% overbought during covid years,” they wrote in a commentary.

“We cut our PC unit estimates for 2022, 2023 and 2024 based on our view that about 10% of shipments during covid years (2020 & 2021) were the result of demand being pulled forward from the next three years.”

The analysts now forecast 2022 shipments of 285 million units, compared to their prior estimate of 322 million and the IDC’s (International) Data Corp. estimate of 320 million. BofA also predicts PC revenue will shrink 9% this year.

‘Overbought’ PC Categories

“All PC categories except commercial desktops and workstations were overbought during the last two years,” they said.

“We expect the overbought categories to see lower demand levels at least through 2023. We expect revenues to see less erosion versus units, as inflationary costs and richer configurations should provide some pricing support.”

As for PC stocks, the Nasdaq Computer stock index, has dropped 24.7% so far this year, compared to a more modest 14.9% slide for the S&P 500

“We cut our 2022 and 2023 estimates for PCs for Dell Technologies  (DELL) – Get Dell Technologies Inc. Class C Report and HP  (HPQ) – Get HP Inc. Report, but leave Apple  (AAPL) – Get Apple Inc. Report unchanged,” the analysts said.

“We maintain our underperform on HPQ, as we expect earnings in not only their PC, but also their print business to see mean reversion after being outsized covid beneficiaries.”

Buy Rating on Dell, Apple

Looking at Dell, “we see its PC business as a structural out-grower versus the overall market, and see scope for further revenue share gains in this segment,” the analysts said.

“For 2024, we see larger benefit for Dell than HPQ, as it has higher exposure to commercial PCs, which on aggregate have shorter replacement cycles versus consumer PCs,” they said.

“Our analysis implies that commercial PCs will see better unit growth from 2022-2024 compared to consumer PCs. This is because … excluding Chromebooks, commercial desktops and workstations were underbought” earlier in the pandemic.

Getting back to Dell it also can gain revenue share in storage and servers, the analysts said. So they reiterated their buy rating on the company.

The analysts also maintained their buy rating on Apple, based on “new chips driving Mac PC share gains and other tailwinds in product and services.”

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