Morgan Stanley: Growth in the IT hardware industry will accelerate by 2025, optimistic about Apple Inc. (AAPL.US), Dell Technologies, Inc. Class C (DELL.US), etc.

As 2025 approaches, Morgan Stanley says that investors in the IT hardware sector should "hold on" in the second half of the year. Morgan Stanley analysts said, "We expect hardware growth to accelerate in 2025, and we are more bullish on the enterprise terminal market rather than the consumer terminal market." Apart from Apple Inc. (AAPL.US), the price-earnings ratio in the hardware industry has reached 19 times, the highest in history. While revenue and profit growth ranges between 4% and 7%, much of it has already been absorbed by the market. The analyst added, "We optimistically believe that most hardware terminal market spending will improve in 2025." "Enterprise hardware terminal market growth should be around 3%." The analyst pointed out that this year's enterprise hardware spending growth rate may be around 1.7%, lower by 20 to 160 basis points from historical lows. However, the analyst's optimism for next year is based on the belief that enterprise spending will accelerate, consumer market will also recover, and areas such as personal computers, peripherals, storage, and servers will benefit. In addition, Morgan Stanley's recent AlphaWise survey of US consumers shows that the willingness to spend on consumer electronics in the next six months is the "least negative" in the past three and a half years. Morgan Stanley advises investors to continue holding Apple Inc. (AAPL.US) -- which is also their top pick -- as well as Dell Technologies, Inc. Class C (DELL.US), Seagate Technology Holdings PLC (STX.US), and Kornit Digital (KRNT.US). At the same time, Morgan Stanley states that the stock valuations of companies such as Garmin Ltd. (GRMN.US), Cricut (CRCT.US), and GoPro (GPRO.US) are "too high," while stocks of other companies like Xerox Holdings Corporation (XRX.US) are in a "long-term decline in terminal markets." Morgan Stanley says that other hardware stocks such as CDW (CDW.US), Ingersoll Rand Inc. (INGM.US), and Logitech International (LOGI.US) may be "undervalued or poised for a stronger cyclical recovery in 2025," while IBM (IBM.US) may face headwinds due to its valuation and "negative skew risk/reward."