Lenovo stocks could fall another 27%, says analyst

beijing — Lenovo Group, which breathed new life into IBM’s personal-computer business, bet that it could do the same with mobile phones and data centers. Now, it’s beginning to look like that gamble is dragging the Chinese manufacturer in the wrong direction.

Shares in China’s biggest PC maker fell for a third straight day in Hong Kong trading after the company reported a surprise net loss Friday. Analysts cut their price targets for the stock, with Macquarie Securities downgrading its rating to hold from a buy.

Lenovo chief executive officer Yang Yuanqing likes to describe the smartphone and server segments, along with new online endeavors as “rice in the field,” not yet ready to be harvested. Yet the two units are struggling and posted losses in the latest quarter, calling into question the strategy of whether any fresh growth can be extracted from markets that are rapidly becoming commoditised. Lenovo’s best bet is to invent new products and services, but that traditionally hasn’t been the company’s strong point, according to Qian Kai, analyst at China International Capital Co.

“Innovation is not in Lenovo’s DNA,” said Qian, the top-ranked analyst in Bloomberg’s Absolute Return Rankings of the 30 analysts who cover Lenovo. His price target for Lenovo is HK$3.20, or 27 per cent below Monday’s close. “It’s more of a trading company than a innovator.”

Lenovo shares retreated as much as 3.6 per cent on Tuesday, to the lowest point since 2011, according to data compiled by Bloomberg. Lenovo is facing stiff competition from rivals that are competing on price — from Xiaomi and Oppo in mobile devices, to Quanta Computer Inc. and Wistron Corp. in the server market. Even with PCs, Lenovo lost its spot as the world’s biggest manufacturer, replaced by HP Inc., while total PC sales shrink.

Representatives from Lenovo didn’t respond to a request for comment. — Bloomberg