The Zacks Computer – Micro Computers industry participants are suffering from waning demand for consumer PCs. Heightened geopolitical challenges, post U.S. President Donald Trump’s decision to levy tariffs on trade partners, is expected to hurt industry participants. Weak demand in China has been a headwind. However, industry participants like Dell Technologies DELL and HP HPQ are benefiting from steady demand for enterprise devices, including laptops, tablets and smartphones. The improving availability of 5G-enabled smartphones has been a key catalyst for industry participants. The launch of foldable and artificial intelligence (AI) and machine learning-infused smartphones, tablets, wearables and hearables is another major growth driver for industry participants.

Industry Description

The Zacks Computer – Micro Computers industry comprises companies that offer smartphones, desktops, laptops, printers, wearables and 3-D printers. Such devices are based either on iOS, MacOS, iPadOS, WatchOS, Microsoft Windows, or Google Chrome and Android operating systems. The companies predominantly use processors from Apple, Intel, AMD, Qualcomm, NVIDIA and Samsung. Expanding screen size, better display, and enhanced storage capabilities have been the key catalysts driving the rapid proliferation of smartphones. This has been well-supported by faster mobile processors. Laptops, both consumer and commercial, benefit from faster processors, sleek designs and expanded storage facilities. The addition of healthcare features has been driving the demand for wearables.

3 Micro Computer Industry Trends to Watch

Enterprise Adoption Remains Healthy: Strong enterprise demand has been benefiting the industry participants. The growing adoption of a hybrid working environment bodes well for the players, as demand for laptops and tablets is expected to increase. Demand for smart devices that offer facial recognition, retina scans or finger impressions to verify the user for biometrics is gaining traction as enterprises enhance security.

Impressive Form Factor Drives Demand: Expanding screen size, better display and enhanced storage capabilities have been the key catalysts driving the rapid proliferation of smartphones and tablets. This has been well-supported by faster mobile processors from Qualcomm, NVIDIA, Apple and Samsung. Improved Internet penetration and speed, along with the evolution of mobile apps, have made smartphones indispensable for consumers. Improved graphics quality is making smartphones suitable for playing sophisticated games. This is driving the demand for high-end smartphones and opening up significant opportunities for device makers.

AI-enabled PCs to Boost Demand: Personal computers (desktops and laptops), be they Windows or Apple’s MacOS-based ones, are expected to benefit from AI infusion. Canalys expects AI-capable PC shipments are projected to surpass 100 million in 2025, representing 40% of all PC shipments. This offers significant growth opportunities for industry participants.

Zacks Industry Rank Indicates Dull Prospect

The Zacks Computer – Micro Computers industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #192, which places it in the bottom 23% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

Given the dim outlook, there are only a few stocks worth watching in the sector. But before we present those stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Lags Sector and S&P 500

The Zacks Computer – Micro Computers industry has outperformed the broader Zacks Computer and Technology sector, as well as the S&P 500 index over the past year.

The industry has returned 13.2% over this period compared with the S&P 500’s return of 6.5% and the broader sector’s growth of 2.8%.

One-Year Price Performance

Industry's Current Valuation

On the basis of forward 12-month P/E, which is a commonly used multiple for valuing computer stocks, we see that the industry is currently trading at 25.47X compared with the S&P 500’s 19.71X and the sector’s 22.28X.

Over the last five years, the industry has traded as high as 32.27X and as low as 18.74X, with the median being 25.42X, as the chart below shows.

Forward 12-Month Price-to-Earnings (P/E) Ratio

2 Computer Stocks to Watch Right Now

Dell Technologies: This Zacks Rank #3 (Hold) company is benefiting from strong demand for AI servers, driven by ongoing digital transformation and heightened interest in generative AI applications. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DELL’s PowerEdge XE9680L AI-optimized server is very much in demand. Strong enterprise demand for AI-optimized servers is aiding Dell Technologies. It is witnessing demand from a diversified customer base that includes higher education institutions, financial services, health care and life services and manufacturing. 

Expanding partner base, which includes NVIDIA, Microsoft, Meta Platforms and Imbue, has been a major growth driver for Dell Technologies. 

The Zacks Consensus Estimate for fiscal 2026 earnings has declined 4% to $8.97 per share over the past 30 days. The stock has appreciated 28.9% year to date.   

Price and Consensus: DELL

HP: This Zacks Rank #3 company is benefiting from its sustained focus on launching new and innovative products. The growing interest in generative artificial intelligence-enabled PCs might give a fresh boost to HP’s PC demand in the years ahead. Windows 11 upgrades and a probable PC refreshment cycle are expected to drive fresh demand for PCs in 2025.

The Zacks Consensus Estimate for fiscal 2025 earnings has declined 2.8% to $3.45 per share over the past 30 days. HP shares have returned 28.1% year to date.   

Price and Consensus: HPQ



 

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This article originally published on Zacks Investment Research (zacks.com).

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