Three Sectors to Benefit, Three Others to Suffer from Growth in Tablets
Tablet shipments are expected to overtake notebook shipment numbers by 2016, according to NPD DisplaySearch's Quarterly Mobile PC Shipment and Forecast Report.
Notebook shipments are expected to go from 208 million units in 2012 to 393 million by 2017, and tablets are expected to go from 121 million to 416 million along the same time period - a 243 percent increase for tablets, as compared to 89 percent in notebooks.
First, a look at the winners.
Memory is a big winner in Morgan Stanley's bull case. According to the analyst firm, a bullish tablet sector could disrupt the memory-based NAND supply-demand balance, which is already tight because of the rising smartphone and tablet adoption rates. SanDisk Corporation (NASDAQ: SNDK) is seen by Morgan Stanley as a stock that provides investors with a favorable play in this direction.
Media is another sector that is poised to have a boom in a tablet era. Morgan Stanley believes that tablets will be a “game changer for content owners.” This is likely to come through the larger audience that would boost the window of opportunity for advertisers, as well as the significant upside in content rental activity. Magazines with a foothold in the digitized format are also likely media winners.
Cable and satellite providers, such as Dish Networks (NASDAQ: DISH), Comcast (NASDAQ: CMCSA), DirecTV (NASDAQ: DTV) and Cablevision Systems (NYSE: CVC) are another sector of winners on the back of the tablet bandwagon. Morgan Stanley believes that this will come through the enhanced video experience and rising broadband consumption that an expanding tablet market will usher in.
Not all industries will be happy in a tablet-heavy world.
Some hardware manufacturers, such as Hewlett Packard (NYSE: HPQ) and Dell (NASDAQ: DELL) may be negatively impacted as the tablet market disrupts the PC space. Shipments are likely to take a 5 percent haircut through 2013, according to Morgan Stanley.
Printing is another industry that Morgan Stanley anticipates will take a sizable hit from tablets. The analyst firm expects this disruption to be structural, in the form of a reduction in enterprise and commercial printing. The expected haircut is a 2 percent to 5 percent reduction in printer supplies revenue through 2012 alone, said Morgan Stanley. Lexmark (NYSE: LXK) and Hewlett Packard are likely to feel some of that pain.
Gaming hardware may also see increased downside from a shift to tablets, according to Morgan Stanley. Over the next two years, the firm expects to see a 6 percent to 8 percent haircut in shipments for the sector. Potentially challenged companies, according to the analyst firm, include Nintendo and Sony (NYSE: SNE).
Tablet-related opportunities and threats go beyond the above-mentioned heat maps. Anything fitting the description of legacy platforms will be placed under the microscope in the next several years. The making or breaking of companies will come based on how quickly they adapt.
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