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DELL’s cheap valuation is attractive for investors. However, is it worth buying at current prices?
Let’s dig deep to find out.
DELL’s P/E Ratio (F12M)
Image Source: Zacks Investment Research
Dell Stock Rides on Strong Portfolio, Partner Base
Year to date, Dell Technologies shares have returned 34.9%, outperforming the broader sector’s return of 13.1% and the industry’s appreciation of 15.4%.
DELL shares have outperformed industry peers, including HP (HPQ - Free Report) and Apple, shares of which have returned 14.3% and 15.1%, respectively.
Year-to-Date Performance
Image Source: Zacks Investment Research
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.
In the second quarter of fiscal 2025, orders for AI-optimized servers increased to $3.2 billion with an increasing number of enterprise customers, including Tier-2 cloud service providers. DELL shipped $3.1 billion of AI servers in the reported quarter and its AI server backlog remains healthy at $3.8 billion.
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 (NVDA - Free Report) , Meta Platforms, Microsoft and Hugging Face.
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 is optimizing its sales force to cover both small and large customer segments as well as geographies. It is also strengthening engineering capabilities, including data center networking and design, to support its AI-related initiatives. DELL believes that the AI hardware and services market will be worth $174 billion by 2027, reflecting a CAGR of more than 22% between 2023 and 2027.
DELL Offers Positive View for 2H25
Dell Technologies expects strong top-line growth in the second half of fiscal 2025, driven by robust AI demand. PC shipments are expected to improve in the fourth quarter of fiscal 2025.
For fiscal 2025, Dell expects revenues between $95.5 billion and $98.5 billion, indicating growth of 10% year over year at the mid-point of $97 billion. It expects the Infrastructure Solutions Group to grow roughly 30%, fueled by AI.
The Zacks Consensus Estimate for fiscal 2025 revenues is currently pegged at $97.43 billion, indicating year-over-year growth of 10.18%.
However, DELL expects non-GAAP gross margin to decline roughly 180 basis points (bps) for fiscal 2025 due to the negative impact of inflation on costs, stiff competition and a higher mix of low-margin of AI optimized servers.
Earnings are expected to be $7.80 per share (+/- 25 cents), up 9% at the mid-point for fiscal 2025.
The consensus mark for Dell’s fiscal 2025 earnings is pegged at $7.84 per share, up a couple of cents over the past 30 days and indicating 9.96% year-over-year growth.
Dell’s robust portfolio and expanding partner base are key drivers that make the stock attractive for long-term investors. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term.
However, the Growth Style Score of D suggests that DELL’s growth prospects are lackluster in the near term. A contraction in fiscal 2025 gross margin of roughly 180 bps (up from previous guidance of 150 bps) is hard to ignore for growth-oriented investors. Continuing weakness in the consumer segment of the PC market is a headwind.
DELL shares are trading below the 50-day moving average, indicating a bearish trend.
Image: Bigstock
Is DELL Stock's 11.43X PE Still Worth It? Buy, Sell, or Hold?
Dell Technologies (DELL - Free Report) shares are one of the cheaper stocks in the broader Zacks Computer & Technology sector, with a Value Score of A.
DELL stock is trading at a significant discount with a forward 12-month P/E of 11.43X compared with the sector’s 24.54X.
It is cheaper than its Zacks Computer – Micro Computers industry peer Apple (AAPL - Free Report) , which is currently trading at a forward 12-month P/E of 29.43X.
DELL’s cheap valuation is attractive for investors. However, is it worth buying at current prices?
Let’s dig deep to find out.
DELL’s P/E Ratio (F12M)
Image Source: Zacks Investment Research
Dell Stock Rides on Strong Portfolio, Partner Base
Year to date, Dell Technologies shares have returned 34.9%, outperforming the broader sector’s return of 13.1% and the industry’s appreciation of 15.4%.
DELL shares have outperformed industry peers, including HP (HPQ - Free Report) and Apple, shares of which have returned 14.3% and 15.1%, respectively.
Year-to-Date Performance
Image Source: Zacks Investment Research
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.
In the second quarter of fiscal 2025, orders for AI-optimized servers increased to $3.2 billion with an increasing number of enterprise customers, including Tier-2 cloud service providers. DELL shipped $3.1 billion of AI servers in the reported quarter and its AI server backlog remains healthy at $3.8 billion.
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 (NVDA - Free Report) , Meta Platforms, Microsoft and Hugging Face.
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 is optimizing its sales force to cover both small and large customer segments as well as geographies. It is also strengthening engineering capabilities, including data center networking and design, to support its AI-related initiatives. DELL believes that the AI hardware and services market will be worth $174 billion by 2027, reflecting a CAGR of more than 22% between 2023 and 2027.
DELL Offers Positive View for 2H25
Dell Technologies expects strong top-line growth in the second half of fiscal 2025, driven by robust AI demand. PC shipments are expected to improve in the fourth quarter of fiscal 2025.
For fiscal 2025, Dell expects revenues between $95.5 billion and $98.5 billion, indicating growth of 10% year over year at the mid-point of $97 billion. It expects the Infrastructure Solutions Group to grow roughly 30%, fueled by AI.
The Zacks Consensus Estimate for fiscal 2025 revenues is currently pegged at $97.43 billion, indicating year-over-year growth of 10.18%.
However, DELL expects non-GAAP gross margin to decline roughly 180 basis points (bps) for fiscal 2025 due to the negative impact of inflation on costs, stiff competition and a higher mix of low-margin of AI optimized servers.
Earnings are expected to be $7.80 per share (+/- 25 cents), up 9% at the mid-point for fiscal 2025.
The consensus mark for Dell’s fiscal 2025 earnings is pegged at $7.84 per share, up a couple of cents over the past 30 days and indicating 9.96% year-over-year growth.
Dell Technologies Inc. Price and Consensus
Dell Technologies Inc. price-consensus-chart | Dell Technologies Inc. Quote
What Should Investors Do With DELL Shares?
Dell’s robust portfolio and expanding partner base are key drivers that make the stock attractive for long-term investors. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term.
However, the Growth Style Score of D suggests that DELL’s growth prospects are lackluster in the near term. A contraction in fiscal 2025 gross margin of roughly 180 bps (up from previous guidance of 150 bps) is hard to ignore for growth-oriented investors. Continuing weakness in the consumer segment of the PC market is a headwind.
DELL shares are trading below the 50-day moving average, indicating a bearish trend.
DELL Shares Trade Below 50-Day SMA
Image Source: Zacks Investment Research
DELL currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.