Microsoft 30% Upside if PC Growth Maintains Current Trend
Microsoft (NASDAQ:MSFT) has been the primary beneficiary from the solid PC market growth in the past along with Dell (NASDAQ:DELL), HP (NYSE:HPQ) and Apple (NASDAQ:AAPL). According to Gartner, the PC market growth is expected to slow to 14% in 2010 and 16% in 2011. [1]
We believe that the advent of tablets, especially the Apple iPad, could further slow down the PC market growth and forecast an average growth rate of 10% for the global notebooks and netbooks unit sales in future. However, if this growth exceeded our estimates and came in closer to growth in recent years, Microsoft could see an addition 30% upside from our estimates.
We estimate that Microsoft’s Windows operating system constitutes around 41% of the $31.56 Trefis price estimate for Microsoft’s stock, which is about 15% above the current market price.
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[trefis_forecast ticker=”MSFT” driver=”0620″]
+30% Upside – PC Market Growth
The notebooks and netbooks market grew from around 86 million in 2006 to 161 million in 2009, at a healthy average growth rate of 24%, by our estimates. [2] [3] [4] However, we estimate this market will grow at an average growth rate of around 10% to reach 381 million units per year by the end of the Trefis forecast period. This is slightly higher than our previous forecast of 8% growth over the coming years.
We believe that the growth may slow down due to the proliferation of tablets which could take buyers away from low cost notebooks and netbooks sales.
However, despite this threat, our estimates may be conservative. If the notebooks and netbooks market can grow close to its historical growth rate of 24% based on increasing needs professionally for mobile computers that may require more functionality than tablets offer and continued surging demand growth in emerging markets, this figure could reach around 900 million units by the end of the Trefis forecast period, implying 30% to our price estimate.
You can see the complete $31.56 Trefis Price estimate for Microsoft stock here.
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