On Friday, Bernstein analysts at SocGen Group adjusted their outlook on Dell Technologies Inc. (NYSE:DELL), increasing the price target to $140.00 while maintaining an Outperform rating on the shares. The revision reflects the firm's confidence in Dell's operational strengths and market position.
According to InvestingPro data, Dell commands a market capitalization of $81.62 billion and generates annual revenue of $93.95 billion, showcasing its significant market presence. Bernstein highlighted Dell's proficiency in gaining market share, managing costs effectively, and growing its cash flow, which is bolstered by a negative cash conversion cycle.
The analysts have consistently argued that Dell deserves a valuation of approximately 12 to 13 times earnings due to its best-in-class operations. Dell's addition of a rapidly expanding artificial intelligence (AI) server business, now exceeding $10 billion, was also noted as a significant development over the past two years.
While profitability in the AI segment has been uneven, InvestingPro analysis reveals the company maintains a gross profit margin of 22.23% and trades at an attractive PEG ratio of 0.35, suggesting reasonable valuation relative to growth. At one point last year, Dell's price-to-earnings (P/E) ratio neared 20 times.
Bernstein's analysis suggests that the entry point for investing in Dell stock is critical. They find the shares particularly appealing when priced in the range of $110 to $115 or lower. This pricing strategy takes into account the potential growth from the AI server business while also considering the current profitability challenges within that sector.
The updated price target of $140.00 by Bernstein represents a vote of confidence in Dell's future prospects and its ability to navigate the complexities of the tech market.
Based on InvestingPro's comprehensive Fair Value analysis, Dell's shares are currently trading near their Fair Value, with 12 additional ProTips and extensive financial metrics available to subscribers. Dell's stock performance and investor sentiment in the coming months will likely be influenced by the company's ability to sustain growth in its core operations as well as its newer AI business.
In other recent news, Dell Technologies revealed a 10% increase in third-quarter earnings, reaching $24.4 billion. This growth was primarily driven by the Infrastructure Solutions Group's focus on AI infrastructure and server solutions. Dell's earnings per share also rose to $2.15, marking a 14% year-over-year increase.
Despite a slight decrease in the Client Solutions Group's revenue, Dell remains optimistic for fiscal year 2026, expecting growth in PC and server refresh cycles and increased demand for AI servers.
In addition, Dell announced a quarterly cash dividend of $0.445 per common share following a 20% increase in the company's annual cash dividend. Meanwhile, the company disclosed the issuance of 25 million Class C common shares upon the conversion of an equal number of Class A common shares by CEO Michael Dell.
On the analysts' front, TD Cowen maintained its Hold rating on Dell, citing underperformance in the PC segment and delayed revenue from AI initiatives. However, Mizuho (NYSE:MFG) Securities, Goldman Sachs, and Citi maintained positive ratings on Dell, adjusting their price targets accordingly.
Regarding AI developments, xAI announced plans to expand its Colossus supercomputer facility in Memphis by adding over one million Graphics Processing Units (GPUs). This move signifies the largest ever capital investment in the Memphis region. Fortune 500 companies Nvidia (NASDAQ:NVDA), Dell, and Supermicro Computer are also set to establish operations in the city, reinforcing its emerging status as a global hub for artificial intelligence.
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