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DELL Loses 11% in a Week: Should Investors Buy the Dip?
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Dell Technologies (DELL - Free Report) shares have dropped 11% in a week. Its prospects have suffered from sluggish PC sales, as well as reports that the U.S. administration will tighten trade restrictions on the chip industry due to China concerns.
Per IDC’s latest report, DELL is the only vendor that witnessed a shipment decline in the second quarter of 2024. Apple’s (AAPL - Free Report) 20.8% estimated year-over-year shipment growth rate is the largest in IDC’s vendor list, followed by Acer Group, Lenovo and HP (HPQ - Free Report) , whose shipments are expected to have increased 13.7%, 3.7% and 1.8%, respectively. DELL is likely to have declined 2.4%.
Lenovo still leads the market with a 22.7% share trailed by HPQ and DELL at 21.1% and 15.5%, respectively. However, both Dell Technologies and HP lost market share, per IDC data.
Moreover, President Joe Biden’s plan to impose harsher trade restrictions on China to limit the manufacture of powerful semiconductors has been detrimental to Dell Technologies, as well as other chip stocks like NVIDIA (NVDA - Free Report) , AMD, ASML and Micron.
Nevertheless, the recent dip in DELL shares presents an entry opportunity for investors. Year-to-date, Dell Technologies shares have returned 63.6%, outperforming the broader Zacks Computer & Technology sector’s return of 35.7% and the Zacks IT Services industry’s gain of 25.8%.
Year-to-Date Performance
Image Source: Zacks Investment Research
Dell Stock Rides on Strong Portfolio, Partner Base
DELL’s outperformance can be primarily attributed to the strong demand for AI servers driven by ongoing digital transformation and heightened interest in generative AI (GenAI) applications.
Dell AI Factory launch has been a key catalyst. It combines Dell Technologies solutions and services optimized for AI workloads and supports an open ecosystem of partners comprising NVIDIA, Meta Platforms, Microsoft and Hugging Face.
Dell Technologies’ robust AI-optimized portfolio has been helping it win enterprise clients rapidly. Its latest PowerEdge XE9680L is an 8-way GPU server with 12 Gen5 PCIe slots and direct-to-chip liquid cooling that improves overall power efficiency by 2.5 times, making it very suitable for enterprises deploying AI capabilities.
Dell Technologies has added the PowerScale F910 to its AI-optimized portfolio, thereby expanding storage capabilities. DELL expanded its networking portfolio with the new PowerSwitch Z9864 with 51 terabits per second of throughput for AI workloads.
Moreover, Dell Technologies is benefiting from an expanding partner base. NVIDIA has played a pivotal role in developing the Dell AI Factory. The collaboration integrates Dell Technologies’ portfolio with NVIDIA’s AI Enterprise software platform and Tensor Core GPUs, enhancing compute power and simplifying AI application development and deployment for faster time to value.
Dell Technologies is collaborating with NVIDIA to build an AI Factory for Tesla CEO Elon Musk’s xAI, which is planning to build a supercomputer by fall next year. It is going to assemble half of the racks for this supercomputer, while the other half will be built by Supermicro.
Dell Technologies and Ericsson are collaborating to develop tailored network cloud infrastructure plans and advise communications service providers on their cloud transformation journeys. The commercial introduction of Ericsson Cloud RAN software on Dell PowerEdge servers with continuous testing and lifecycle management is noteworthy.
Strong AI Shipment to Aid Top-line Growth
Dell has shipped more than $3 billion of AI servers over the last three quarters. It expects the momentum to continue in fiscal 2025, driven by a strong portfolio of AI-optimized solutions and an expanding partner base.
For fiscal 2025, Dell expects revenues between $93.5 billion and $97.5 billion, indicating growth rate of 8% year over year at the mid-point of $95.5 billion. It expects the Infrastructure Solutions Group to grow by more than 20%, fueled by AI.
Dell Technologies Inc. Price, Consensus and EPS Surprise
The Zacks Consensus Estimate for fiscal 2025 revenues is currently pegged at $96.76 billion, indicating year-over-year growth of 9.43%.
Strong top-line growth, along with stringent cost control, is expected to fully offset a 150 basis point decline in gross margin for the fiscal year. Dell expects operating expenses to decline by low single digits for the fiscal year, thereby benefiting the bottom line. Earnings are expected to be $7.65 per share (+/- 25 cents), up 7% at the mid-point for fiscal 2025.
The consensus mark for Dell’s fiscal 2025 earnings is pegged at $7.82 per share, up 2% over the past 60 days and indicating 9.68% year-over-year growth.
Estimate Revision
Image Source: Zacks Investment Research
Conclusion
Dell’s robust portfolio and expanding partner base are key drivers. Its strong liquidity, with a cash balance of $7.3 billion, is noteworthy as it makes dividend payout more sustainable.
The Value Style Score of B suggests that DELL is undervalued at this moment.
P/E Ratio (F12M)
Image Source: Zacks Investment Research
This Zacks Rank #2 (Buy) stock is trading at a significant discount with a forward 12-month P/E of 14.43X compared with the Zacks IT Services industry’s 31.52X, making the stock an attractive pick for investors. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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DELL Loses 11% in a Week: Should Investors Buy the Dip?
Dell Technologies (DELL - Free Report) shares have dropped 11% in a week. Its prospects have suffered from sluggish PC sales, as well as reports that the U.S. administration will tighten trade restrictions on the chip industry due to China concerns.
Per IDC’s latest report, DELL is the only vendor that witnessed a shipment decline in the second quarter of 2024. Apple’s (AAPL - Free Report) 20.8% estimated year-over-year shipment growth rate is the largest in IDC’s vendor list, followed by Acer Group, Lenovo and HP (HPQ - Free Report) , whose shipments are expected to have increased 13.7%, 3.7% and 1.8%, respectively. DELL is likely to have declined 2.4%.
Lenovo still leads the market with a 22.7% share trailed by HPQ and DELL at 21.1% and 15.5%, respectively. However, both Dell Technologies and HP lost market share, per IDC data.
Moreover, President Joe Biden’s plan to impose harsher trade restrictions on China to limit the manufacture of powerful semiconductors has been detrimental to Dell Technologies, as well as other chip stocks like NVIDIA (NVDA - Free Report) , AMD, ASML and Micron.
Nevertheless, the recent dip in DELL shares presents an entry opportunity for investors. Year-to-date, Dell Technologies shares have returned 63.6%, outperforming the broader Zacks Computer & Technology sector’s return of 35.7% and the Zacks IT Services industry’s gain of 25.8%.
Year-to-Date Performance
Image Source: Zacks Investment Research
Dell Stock Rides on Strong Portfolio, Partner Base
DELL’s outperformance can be primarily attributed to the strong demand for AI servers driven by ongoing digital transformation and heightened interest in generative AI (GenAI) applications.
Dell AI Factory launch has been a key catalyst. It combines Dell Technologies solutions and services optimized for AI workloads and supports an open ecosystem of partners comprising NVIDIA, Meta Platforms, Microsoft and Hugging Face.
Dell Technologies’ robust AI-optimized portfolio has been helping it win enterprise clients rapidly. Its latest PowerEdge XE9680L is an 8-way GPU server with 12 Gen5 PCIe slots and direct-to-chip liquid cooling that improves overall power efficiency by 2.5 times, making it very suitable for enterprises deploying AI capabilities.
Dell Technologies has added the PowerScale F910 to its AI-optimized portfolio, thereby expanding storage capabilities. DELL expanded its networking portfolio with the new PowerSwitch Z9864 with 51 terabits per second of throughput for AI workloads.
Moreover, Dell Technologies is benefiting from an expanding partner base. NVIDIA has played a pivotal role in developing the Dell AI Factory. The collaboration integrates Dell Technologies’ portfolio with NVIDIA’s AI Enterprise software platform and Tensor Core GPUs, enhancing compute power and simplifying AI application development and deployment for faster time to value.
Dell Technologies is collaborating with NVIDIA to build an AI Factory for Tesla CEO Elon Musk’s xAI, which is planning to build a supercomputer by fall next year. It is going to assemble half of the racks for this supercomputer, while the other half will be built by Supermicro.
Dell Technologies and Ericsson are collaborating to develop tailored network cloud infrastructure plans and advise communications service providers on their cloud transformation journeys. The commercial introduction of Ericsson Cloud RAN software on Dell PowerEdge servers with continuous testing and lifecycle management is noteworthy.
Strong AI Shipment to Aid Top-line Growth
Dell has shipped more than $3 billion of AI servers over the last three quarters. It expects the momentum to continue in fiscal 2025, driven by a strong portfolio of AI-optimized solutions and an expanding partner base.
For fiscal 2025, Dell expects revenues between $93.5 billion and $97.5 billion, indicating growth rate of 8% year over year at the mid-point of $95.5 billion. It expects the Infrastructure Solutions Group to grow by more than 20%, fueled by AI.
Dell Technologies Inc. Price, Consensus and EPS Surprise
Dell Technologies Inc. price-consensus-eps-surprise-chart | Dell Technologies Inc. Quote
The Zacks Consensus Estimate for fiscal 2025 revenues is currently pegged at $96.76 billion, indicating year-over-year growth of 9.43%.
Strong top-line growth, along with stringent cost control, is expected to fully offset a 150 basis point decline in gross margin for the fiscal year. Dell expects operating expenses to decline by low single digits for the fiscal year, thereby benefiting the bottom line. Earnings are expected to be $7.65 per share (+/- 25 cents), up 7% at the mid-point for fiscal 2025.
The consensus mark for Dell’s fiscal 2025 earnings is pegged at $7.82 per share, up 2% over the past 60 days and indicating 9.68% year-over-year growth.
Estimate Revision
Image Source: Zacks Investment Research
Conclusion
Dell’s robust portfolio and expanding partner base are key drivers. Its strong liquidity, with a cash balance of $7.3 billion, is noteworthy as it makes dividend payout more sustainable.
The Value Style Score of B suggests that DELL is undervalued at this moment.
P/E Ratio (F12M)
Image Source: Zacks Investment Research
This Zacks Rank #2 (Buy) stock is trading at a significant discount with a forward 12-month P/E of 14.43X compared with the Zacks IT Services industry’s 31.52X, making the stock an attractive pick for investors. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.