Lenovo shares drop to near 5-mth low on brokerage downgrades

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Wed Jul 4, 2012 4:15am BST

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HONG KONG, July 4 (Reuters) - Shares of Lenovo Group Ltd (0992.HK), the world's No.2 PC maker, tumbled almost 5 percent to a near five-month low after two brokerages downgraded their outlooks for the company as global economic weakness damps demand for personal computers.

Lenovo shares fell as much as 4.9 percent to an intraday low of HK$6.05 in early trade on Wednesday, the weakest level since early February and falling below their 200-day moving average.

Jefferies and CLSA downgraded the computer maker to "underperform", saying Lenovo, which ranks behind Hewlett Packard Co (HPQ.N) in PC market share, was likely to be affected by a sluggish outlook for the PC sector.

"While Lenovo is on track to expand share in a tough PC market, we believe that slowing demand in both China and overseas negatively impacts overall growth, thus leaving room for downward revisions of street expectations," Jefferies said in a report.

It downgraded Lenovo to "underperform" from "hold" and lowered its price target to HK$5.70 from HK$6.00.

CLSA said it noticed indications of a slowdown in China and risks of an inventory buildup as the PC maker builds new plants in Chengdu, Hefei and Wuhan.

CLSA cut Lenovo's target price to HK$7.01 from HK$7.75 and also revised down its sales and earnings forecasts for the year ending March 2013.

Despite the latest fall, Lenovo's shares are still up 17 percent since the beginning of the year, while competitors HP, Dell Inc (DELL.O) and Acer Inc's (2353.TW) stocks are all down due to a combination of a weak demand outlook and worries over their management and production strategies.

Lenovo's shares took a tumble last week after a newspaper report said it had halved its growth forecasts. However, the Beijing-based company denied later that it had issued new guidance. [ID:nL3E8HM0CQ]

Lenovo Chairman and CEO Yang Yuanqing said on the sidelines of a shareholders' meeting on Tuesday that the company would repurchase shares at an appropriate time, though he did not elaborate.

(Reporting by Lee Chyen Yee and Vikram Subhedar; Editing by Chris Gallagher)

((chyenyee.lee@thomsonreuters.com)(852)(2843-6901)(Reuters Messaging: chyenyee.lee.reuters.com@reuters.net)) Keywords: LENOVO SHARES/

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