World’s worst tech stock is China’s hottest
What was the world’s worst technology stock only months ago has become China’s hottest, staging a defiant comeback since it was booted off Hong Kong’s benchmark gauge.
Lenovo Group has seen its shares surge 43 per cent in the nearly five months since the announcement of its removal from the Hang Seng Index — an increase that beats every other Chinese technology stock during the same period while outperforming the broader Hang Seng index that this month slumped into a bear market.
The rapid reboot of the PC manufacturer’s shares is a welcome surprise for investors who had grown accustomed to Lenovo being the world’s worstperforming technology stock, plunging 56 per cent between March 2013 and April as it repeatedly missed turnaround targets for its embattled smartphone business.
“Lenovo’s fundamentals are having a rebound, which surprised some investors,” said Linus Yip, a strategist with First Shanghai Securities. “The sales recovery story is particularly attractive in a bear market, at a time when a tech darling such as Tencent Holdings is facing growth bottlenecks.” Tencent has fallen 20 per cent since Lenovo was removed from the Hang Seng gauge in June.
Driving the rebound is a revival in global PC shipments, which saw the fastest growth in six years in the three months ended June as Lenovo reported a better net income of $77 million during the period. Its loss-making smartphone unit, which used to be a big concern to investors, almost halved its losses on-year while it is benefiting from strong sales and shipment momentum in the global server business.
Short sellers are getting burned as the stock soars: bearish interest fell to just 5.6 per cent of free float from 16 per cent in May, which was the highest in at least 12 years. Analysts have lifted their average target price by 20 per cent since the day before Lenovo’s quarterly results.
“Lenovo’s fundamentals are having a rebound, which surprised some investors”
LINUS YIP
strategist with First Shanghai Securities