Lexmark Market Share Recovery on Laser Printer Focus Gives Upside for Stock
Lexmark’s (NYSE:LXK) market share in laser printers has consistently declined in the past few years because of declining share of Dell (NASDAQ:DELL) in Lexmark’s revenues and faster growth by competitors HP (NYSE:HPQ), Samsung and Canon.
As Lexmark increases its focus in laser market, we expect it to gain some share from smaller players, which should stall further decline in its market share.
We currently have a Trefis price estimate of $39.90 for Lexmark’s stock, about 11% above the current market price of $35.52.
- Lexmark Earnings: Revenue Decline Across Printer Division Continues
- Lexmark Pre Earnings: Printer Revenue To Decline, Software Revenue To Report Growth
- Lexmark Earnings: Revenue Declines Less Than Expected As Merger And Delisting Seems Eminent
- Lexmark Earnings Preview: Decline In Revenue To Continue
- What Percentage of Lexmark’s Stock Price Can Be Attributed To Growth?
- Lexmark Earnings: Revenue Declines More Than Expected
Declining Dell Share and Faster Growth by Competitors
Dell’s share in Lexmark’s revenues has declined slightly from 15% in 2006 to 13% in 2008. We forecast Dell will exit the printer business, which could hurt Lexmark, as it will lose close to 10% of its revenue share. Hence, we don’t expect the market share to grow rapidly in the future–despite its focus on laser printer market.
Companies like HP have a much wider distribution network and geographic presence compared to Lexmark. Hence, even though the printers might be comparable in quality, HP is selling much more than Lexmark.
Lexmark Narrowing Focus on Laser Printers
Lexmark has narrowed its focus in the inkjet market to “all-in-one” printers and is increasing its focus in the laser market as that is the future of the printing business. As the costs of making a laser printer decline, prices will also decline helping consumers migrate to laser printers given their faster speed and inexpensive per page printing cost when compared to inkjet printers.
With its increasing focus on the laser market, we expect Lexmark to gain back some market share from smaller players, which should help it plug its declining market share.
Member Forecast
The laser printers and cartridges business is very crucial for Lexmark as it constitutes around 78% of its stock price, based on our estimates. The Trefis community estimates that Lexmark laser printer market share will gain ground and capture about 4.75% of the market share by 2013 and trend to 5% by the end of the forecast period. This scenario adds around 18% to the Trefis price estimate which forecasts flat market share of 4% from 2011 onward.