Lenovo Group (LNVGY) AI Stock Analysis

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Lenovo Group

(OTC:LNVGY)

77Outperform

Lenovo Group's overall stock score reflects strong financial health, particularly in cash flow and profitability metrics, despite some pressure on operating margins. The earnings call was positive, highlighting record growth and strategic advancements in AI. While technical analysis shows a bearish trend, the valuation remains attractive, suggesting potential upside for value-focused investors. External challenges such as tariffs are noted, but the company's strategic initiatives and robust performance across segments are key strengths.

Lenovo Group (LNVGY) vs. S&P 500 (SPY)

Market Cap

$14.13B

Dividend Yield4.3%

Average Volume (3M)26.21K

Price to Earnings (P/E)8.8

Beta (1Y)0.64

Revenue Growth18.43%

EPS Growth71.68%

CountryUS

Employees69,500

SectorTechnology

Sector Strength57

IndustryComputer Hardware

Share Statistics

EPS (TTM)2.51

Shares Outstanding620,233,000

10 Day Avg. Volume0

30 Day Avg. Volume26,208

Financial Highlights & Ratios

PEG Ratio0.12

Price to Book (P/B)N/A

Price to Sales (P/S)0.51

Price to Cash Flow (P/CF)N/A

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price TargetN/A

Price Target UpsideN/A

Rating ConsensusN/A

Number of Analyst Covering0

Lenovo Group Business Overview & Revenue Model

Company DescriptionLenovo Group Limited is a multinational technology company headquartered in Beijing, China, and Morrisville, North Carolina, United States. Operating in the technology and electronics sectors, Lenovo specializes in designing, manufacturing, and marketing a wide range of products including personal computers, smartphones, tablets, servers, and other smart devices. The company is recognized for its ThinkPad line of laptops, which are widely used in business environments, as well as its Yoga series of consumer laptops.

How the Company Makes MoneyLenovo generates revenue through several key streams, primarily from its PC and Smart Devices (PCSD) segment, which includes sales of desktops, laptops, tablets, and other smart devices. This segment represents the bulk of Lenovo's income, driven by its strong market presence and brand recognition. Additionally, Lenovo's Data Center Group (DCG) contributes to its revenue by providing servers, storage, and networking products. The Mobile Business Group (MBG) adds to earnings through the sale of smartphones. Significant partnerships, such as those with Intel and Microsoft, enhance product offerings and market reach, further supporting Lenovo's revenue model.

Lenovo Group Financial Statement Overview

Summary

Lenovo exhibits solid financial health with robust cash flow growth and profitability metrics. The income statement reflects strong revenue growth and resilient profit margins, though some pressure on EBIT margins is evident. The balance sheet is stable with moderate leverage, but the low equity ratio suggests a need for monitoring. Overall, Lenovo's financials indicate effective management, despite some concerns about equity levels.

Income Statement

Positive

Lenovo's income statement reveals strong gross profit margins of 16.3% TTM, with a net profit margin of 2.3%. The company has shown resilience with a revenue growth rate of 15.9% from the previous annual report, despite a 7.1% decline compared to two years ago. EBIT and EBITDA margins are 3.4% and 5.0% respectively, indicating stable earnings potential. However, the EBIT margin has decreased from 4.3% two years ago, suggesting some pressure on operating efficiency.

Balance Sheet

Positive

The balance sheet reflects a moderate debt-to-equity ratio of 0.79, indicating a balanced approach to leveraging. The return on equity stands at 30.7% TTM, showcasing effective use of equity to generate profits. However, the equity ratio is relatively low at 11.2%, suggesting limited equity buffer. The company's total assets have grown, but stockholders' equity has decreased compared to two years ago, posing a potential concern for financial stability.

Cash Flow

Positive

Lenovo's cash flow metrics are strong, with a significant free cash flow growth rate of 170.7% TTM, reflecting robust cash generation capabilities. The operating cash flow to net income ratio is 1.75, indicating efficient conversion of income into cash. Additionally, the free cash flow to net income ratio of 1.27 supports the company's healthy cash position. Despite these strengths, there is a need to monitor capital expenditure trends affecting free cash flow.

TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Breakdown
Income Statement		Total Revenue
65.93B	56.86B	61.95B	71.62B	60.74B	50.72B
	Gross Profit
10.74B	9.80B	10.50B	12.05B	9.77B	8.36B
	EBIT
2.22B	2.01B	2.67B	3.08B	2.18B	1.44B
	EBITDA
3.28B	3.56B	4.15B	4.38B	3.25B	2.43B
	Net Income Common Stockholders
1.54B	1.01B	1.61B	2.03B	1.21B	718.85M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
4.12B	3.57B	4.32B	3.96B	3.13B	3.62B
	Total Assets
44.72B	38.75B	38.92B	44.51B	37.99B	32.13B
	Total Debt
3.98B	3.96B	4.36B	5.93B	4.42B	6.44B
	Net Debt
46.87M	401.86M	109.27M	2.00B	1.35B	2.89B
	Total Liabilities
38.58B	32.67B	32.87B	39.12B	34.38B	28.07B
	Stockholders Equity
5.03B	5.58B	5.59B	4.99B	3.56B	4.19B
Cash Flow		Free Cash Flow
1.96B	725.09M	1.22B	2.79B	2.81B	1.26B
	Operating Cash Flow
2.70B	2.01B	2.80B	4.08B	3.65B	2.21B
	Investing Cash Flow
-1.17B	-1.28B	-1.92B	-1.50B	-975.90M	-956.95M
	Financing Cash Flow
-923.43M	-1.34B	-413.78M	-1.76B	-3.23B	-238.49M

Lenovo Group Technical Analysis

Technical Analysis Sentiment

Negative

Last Price22.04

Price Trends

50DMA

28.02

Negative

100DMA

26.41

Negative

200DMA

26.09

Negative

Market Momentum

MACD

-2.06

Negative

RSI

40.03

Neutral

STOCH

89.63

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LNVGY, the sentiment is Negative. The current price of 22.04 is below the 20-day moving average (MA) of 23.32, below the 50-day MA of 28.02, and below the 200-day MA of 26.09, indicating a bearish trend. The MACD of -2.06 indicates Negative momentum. The RSI at 40.03 is Neutral, neither overbought nor oversold. The STOCH value of 89.63 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LNVGY.

Lenovo Group Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LNVGY	77 Outperform	$14.13B	8.77	27.60%	4.30%	18.43%	71.68%
NTAP	70 Outperform	$18.20B	16.32	114.33%	2.43%	5.46%	23.49%
WDC	68 Neutral	$13.97B	9.58	13.99%	―	38.59%	―
DELL	66 Neutral	$66.22B	14.80	-179.12%	1.88%	7.84%	42.63%
STX	66 Neutral	$17.51B	15.20	-109.27%	3.42%	24.17%	―
HPQ	63 Neutral	$23.88B	9.10	84.33%	4.46%	1.03%	-18.56%
Sector *	59 Neutral	$10.74B	10.21	-6.69%	3.04%	7.44%	-10.92%

* Technology Sector Average

Performance Comparison

LNVGY

Lenovo Group

22.79

0.39

1.74%

HPQ

25.28

-1.77

-6.54%

NTAP

NetApp

88.45

-10.96

-11.03%

STX

Seagate Tech

82.70

-0.89

-1.06%

WDC

Western Digital

40.78

-13.14

-24.37%

DELL

Dell Technologies

94.89

-28.01

-22.79%

Lenovo Group Earnings Call Summary

Earnings Call Date: Feb 20, 2025 | % Change Since: -31.87% | Next Earnings Date: May 22, 2025

Earnings Call Sentiment Positive

The earnings call presented a robust overall performance with significant revenue and profit growth across all business segments. Lenovo's strategic investments in AI and innovation are driving new product launches and market leadership. However, external challenges such as tariffs and achieving sustainable profitability in certain segments remain areas of concern.

Highlights

Record Revenue and Profit Growth

Lenovo's group revenue grew by 20% year-on-year to $18.8 billion, marking a three-year record, with net income surging by 106% year-on-year.

Intelligent Devices Group (IDG) Success

The IDG achieved double-digit revenue growth year-on-year, with the PC segment strengthening its market leadership and smartphone revenue continuing its double-digit growth.

Infrastructure Solutions Group (ISG) Turnaround

ISG delivered almost 60% year-on-year growth in revenue and achieved a break-even, driven by CSP business reaching a historical high.

Solutions and Services Group (SSG) Growth

SSG achieved double-digit revenue growth to a record high, with an operating margin of 20%, and its AI solution business is building lighthouse cases for top customers.

Strategic Investments and Innovations

Lenovo increased R&D investment by 14% year-on-year, focusing on AI, and launched a series of innovative products, including the world's first rollable AI laptop.

Lowlights

Tariff and Production Relocation Challenges

Potential impacts from the Trump administration's tariffs on imports to the US and production relocation were discussed, although Lenovo is confident in its flexible manufacturing model.

Mobile Business Market Challenges

Despite strong growth, the mobile business is still aiming to recover a small loss of share in certain markets and is focused on becoming the number three player outside China.

ISG Profitability Path

While ISG achieved a break-even, the focus remains on sustained long-term profitability, with no specific future guidance provided.

Company Guidance

In Lenovo's recent investor earnings webcast for Q3 of fiscal year 2025, the company reported significant financial improvements and strategic advancements. Group revenue increased by 20% year-on-year to a three-year record of $18.8 billion, while net income surged by 106% year-on-year. Non-PC sales accounted for 46% of total sales, with the Smartphone segment achieving a record market share outside China. The Infrastructure Solutions Group (ISG) experienced remarkable growth, with revenue up 59% year-on-year, achieving profitability driven by the Cloud Service Provider (CSP) business. The Solutions & Services Group (SSG) continued its double-digit revenue growth, contributing 31% to the overall operating profit with an operating margin of 20%. Lenovo also emphasized its commitment to AI innovation, with increased investment in R&D and the introduction of AI-powered products, positioning itself to capitalize on the growing demand for AI applications across various sectors.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.