Lenovo – still cheap despite trading at three-year high?

The share of the world’s largest PC maker Lenovo – are currently trading at its highest since May 2021 based on its yesterday’s closing price of HKD 10.64, despite pulling back 12% since its extraordinary 48% rally in a month from 22 April 2024 to 27 May 2024.

Lenovo’s +48% rally had come on the back of 1) better than expected earnings, 2) analysts’ share price upgrades on expectations of the next generation AI PCs to further fuel the company’s growth, and 3) just before the news release of an agreement with Alat – a wholly owned subsidiary of the Public Investment Fund (PIF), the sovereign wealth fund of the Kingdom of Saudi Arabia (KSA) – to set up a regional headquarters in Riyadh, the capital of Saudi Arabia.

Lenovo is one of the top index performers on the Hang Seng Index in the past 2.5 months, with a 19.4% gain versus the unchanged benchmark index, but continues to have a price-earnings ratio that is below the industry average.