Delving into the Allure of Dell Technologies DELL shares paints a picture of a diamond in the rough situated within the vast expanse of the Zacks Computer & Technology sector, boasting a Value Score of A.
DELL stock stands at a remarkable discount, sporting a forward 12-month P/E of 11.43X, in stark contrast with the sector’s lofty 24.54X valuation. This stark comparison becomes even more pronounced when juxtaposed with its industry counterpart, Apple AAPL, the Cupertino giant, currently trading at a forward 12-month P/E of 29.43X.
Affordability often begets appeal, especially in the world of investing. The tantalizingly low valuation of DELL may indeed captivate investors. But, the pertinent question lingers – should one take the plunge at the prevailing price levels?
Reminiscing DELL’s P/E Ratio (F12M)
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The Rise of Dell Stock on the Shoulder of a Strong Portfolio and Partner Base
In the current year, Dell Technologies shares have been a beacon of hope for investors, clocking in a return of 34.9%. This meteoric rise outshines the sector’s overall return standing at 13.1% and the industry’s upturn of 15.4%.
DELL shares have effortlessly outpaced its industry brethren, including the likes of HP HPQ and the tech behemoth Apple, with returns of 14.3% and 15.1%, respectively.
Charting Year-to-Date Performance
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The flourishing trajectory of DELL can be primarily traced back to the robust demand for AI servers, fueled by the ongoing digital transformation and burgeoning interest in generative AI (GenAI) applications.
The second quarter of fiscal 2025 witnessed a surge in orders for AI-optimized servers, soaring to $3.2 billion, attracting an expanding clientele of enterprise customers, which also includes Tier-2 cloud service providers. DELL transported $3.1 billion worth of AI servers in the reported quarter, with its AI server backlog remaining robust at $3.8 billion.
The debut of the Dell AI Factory emerged as a pivotal catalyst, harmonizing Dell Technologies solutions and services tailored for AI workloads, bolstering an open partnership ecosystem encompassing tech titans such as NVIDIA NVDA, Meta Platforms, Microsoft, and Hugging Face.
DELL Foresees a Rosy Outlook for 2H25
Envisioning a rosy picture painted with vibrant hues for the second half of fiscal 2025, Dell Technologies anticipates a robust upswing in the top-line, primarily steered by the fervent AI demand. Expectations stand optimistic for the fourth quarter of fiscal 2025 regarding PC shipments.
For the same fiscal year, Dell sets its sights on revenues ranging between $95.5 billion and $98.5 billion, signaling a 10% surge on a year-over-year basis, with the mid-point pegged at $97 billion. The Infrastructure Solutions Group is poised to grow by roughly 30%, propelled by the AI bandwagon.
Despite the upbeat revenue outlook, Dell anticipates a dip of about 180 basis points in non-GAAP gross margin for fiscal 2025, attributing the decline to the adverse impact of inflation on costs, intensified competition, and an augmented mix of low-margin AI optimized servers.
Projections point towards earnings reaching $7.80 per share (+/- 25 cents), eyeing a 9% uptick at the mid-point for fiscal 2025.
DELL’s robust portfolio and expanding partner network stand tall as the pillars underpinning the allure of its stock for long-term investors. Premiering a compelling narrative of growth prospects, existing shareholders may anticipate a bountiful yield in the distant horizon.
However, the tepid Growth Style Score of D points towards lackluster growth on the immediate horizon for DELL, adding a sour note for growth-focused investors. The purported contraction of roughly 180 bps in fiscal 2025 gross margin, a shift from the earlier guidance of 150 bps, forms a red flag fluttering amidst growth-oriented waters. The lingering fragility in the consumer segment of the PC market adds to the headwinds looming ahead.
The downtrend of DELL shares below the 50-day moving average signals a bearish trajectory, adding a shade of caution for prospective investors.
DELL Struggles Below 50-Day SMA
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Currently donning a Zacks Rank #3 (Hold), the prevailing stance on DELL hints at exercising prudence and awaiting a more opportune moment for entry into the stock. Peering through the lens of these observations may pave the way for a judicious move when contemplating Dell Technologies.
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The views and opinions expressed herein capture the essence of the author’s introspection and may not necessarily mirror the sentiments of Nasdaq, Inc.
