That positive 2019 industry growth has been largely attributed to Microsoft ending support for their Windows 7 operating system, which drove consumers to new devices to run the more advanced Windows 10 operating system. However, at a firm level, Lenovo has been growing steadily in market share for years and their current market price does not appear to be reflective of that fact. According to data from Statista, in the first quarter of 2011 Lenovo had market share of 10.4% and by the fourth quarter of 2019 their market share rose to 24.8%.⁵ Meanwhile, from 3/31/2011 to 2/14/2020 Lenovo ADR shares have only rose from an adjusted price of $7.71 to $13.60 (a rise of 76%), while the SP500TR, a proxy for the S&P 500 total return index, rose from $2,239.44 to $6,872.68 (a rise of 207%).

   Financially Lenovo has had mixed results, perhaps helping to explain the disconnect between the firm’s market share dominance and their stock performance. From 2015 to 2019 (their fiscal year ends in March) revenue rose from $46B to $51B (annualized growth of 2.5%). While profits have oscillated between positive and negative, in three out of the last five years the firm has reported positive net income, with the positive years significantly outweighing the years of losses. Furthermore, cash flow from operations has been positive in four out of the last five years. Lenovo has low margins compared to peers, but I believe that to be a characteristic of the strategic business strategy the firm is pursuing (high value at a low cost to attract and retain customers). Nonetheless, the latest quarterly report, 2019Q2 ending 9/30/2019, showcased a gross profit margin of 16.1% (up 2.7% YoY) and a profit margin of 1.5% (up 0.25% YoY), showcasing improved expense management on both the cost of goods sold and operating line items.