PC Sales: When Will Personal Computers Return To Growth?

Personal computer sales collapsed last year following an unprecedented sales surge during the Covid pandemic. The downturn has rattled companies exposed to the PC market, including makers of hardware, components and software. The question now is: When will PC sales recover?

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Computer and chip companies are pointing to a recovery in PC sales in the second half of 2023. But stubbornly high inventories and a possible recession could postpone the rebound.

“Demand is low and there are too many PCs in the (sales) channel,” Gartner analyst Mikako Kitagawa told Investor’s Business Daily. “Buyers don’t have the purchase motivation.”

Market research firm Gartner predicts that PC sales will fall 12% this year after a 17% decline in 2022. During the pandemic, PC sales rose 5% in 2020 and 11% in 2021.

PC Recovery Seen Next Year

On the bright side, Gartner sees PC sales springing back next year with 9% growth to 273 million units.

That would be good news for PC vendors Dell Technologies (DELL) and HP (HPQ). PC processor makers Advanced Micro Devices (AMD) and Intel (INTC) and software giant Microsoft (MSFT) also would benefit.

Meanwhile, niche player Apple (AAPL) bucked the downturn last year. Its Mac sales increased 3.6% in 2022, thanks to a refreshed lineup of premium computers and a devoted user base, Gartner said.

Apple ranked fourth in market share at 9.8%, up from 7.9% the previous year. It trailed Lenovo’s 24.1%, HP’s 19.4% and Dell’s  17.5%, Gartner said.

PC Sales Recovery In Late 2023 Doubted

However, Wall Street analysts have conflicting views on whether the PC market will bounce back later this year.

Loop Capital analyst John Donovan is pessimistic about PC sales in the near term. He titled a recent note to clients: “Reports of a PC Recovery Are Greatly Exaggerated.”

“The rhetoric that PC fortunes are better (is) hardly the case thus far,” Donovan said. “The facts suggest the second quarter will be equally as bothersome as the first quarter.”

And the forecast recovery in PC sales in the second half of 2023 is simply “hope,” he said.

Signs Of A Bottom Emerging

Yet Morgan Stanley analyst Erik Woodring is optimistic about a PC recovery. He titled his recent note to clients: “Time to Get More Positive on PCs.”

Woodring upgraded Dell stock to overweight from equal weight, or neutral. He also upgraded HP stock to equal weight from underweight. Plus, he upgraded foreign-traded shares of PC makers Lenovo, Acer and Asus as well as several contract manufacturers.

“After the worst PC downcycle in 30-plus years, it’s time to get more constructive as signs of a bottom emerge,” Woodring said. He believes the first quarter will mark the bottom of a two-year PC sales correction.

“In the near term, PC demand is tepid but stable, and channel inventory continues to get worked down,” he said.

PC Stocks Haven’t Priced In Recovery Yet

The best time to buy PC stocks is in the three months before shipments reach a bottom, Woodring said. And PC stocks like Dell have only just started to price in the bottom, he said.

“For cyclical end markets like PCs, history shows that it pays to be somewhat contrarian,” he said. “You want to buy PC stocks 0-3 months before year-over-year shipment declines trough and when sentiment looks worst.”

Intel Chief Executive Pat Gelsinger said the installed base of personal computers is roughly 10% higher than pre-Covid levels. That creates a larger market for customers upgrading their machines, he said on a recent conference call with analysts.

In the first quarter, Intel’s Client Computing Group saw sales decline 38% year over year to $5.8 billion.

Rival AMD said its PC chip revenue crashed 65% year over year to $739 million in the March quarter.

Enterprise Customers Drive PC Sales

The personal computer market historically has been 60% enterprise sales and 40% consumer sales. This year, businesses and other enterprises are likely to make up 64% of PC sales, Gartner’s Kitagawa said.

But a slowing economy, rising layoffs and fewer new hires could put a damper on enterprise PC sales, she said.

“PCs are an essential technology for business,” she said. “The question is how often they upgrade and how many new PCs are added.”

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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