Our target price of NT$27.0 for Acer is based on 13x forward earnings estimates. We believe a P/E multiple is appropriate for valuing Acer now that the company's earnings have stabilized given improved execution, and better inventory management and product strategy. Our target multiple reflects macro uncertainty; 13x is at the lower-end of historical trading range since 2020 and is justified by the company's muted earnings growth and limited margin improvement.

Upside risks that could sustain Acer shares above our target price include: 1) stronger-than-expected NB demand recovery and margin expansion; 2) better-than-expected control of working capital and cash conversion; 3) better-than-expected execution on new business; 4) milder market-share loss (or even market-share gain); and 5) lower-than-expected risks of intangibles write-off.