On Monday, Evercore ISI demonstrated increased confidence in Dell Technologies Inc. (NYSE:DELL), raising its price target to $140 from $125 while sustaining an Outperform rating on the stock. The firm's optimism follows recent investor meetings with Dell's top executives, including Founder, Chairman, and CEO Michael Dell. During these discussions, a range of topics was covered, with a particular focus on artificial intelligence (AI) server deployments and the improving IT demand environment.
Investors showed keen interest in Dell's AI capabilities, especially regarding server deployments, opportunities beyond compute, and the company's competitive edge in the field. Initial feedback from enterprise deployment of AI solutions was also a topic of interest. Alongside AI, there was a positive sentiment about the recovering demand in other IT sectors, such as PCs, traditional compute, and storage.
The company is witnessing a surge in demand from tier-2 cloud service providers (CSPs) for AI servers, with increasing interest from sovereign countries and enterprises as well. Dell also expects an uptick in enterprise demand across its broader Infrastructure Solutions Group (ISG) portfolio, which includes storage and general compute servers. This demand is anticipated to grow in the future.
Dell's capital allocation priorities remain favorable, with a commitment to share buybacks and dividends. The company's approach to mergers and acquisitions is expected to be conservative, focusing on smaller, strategic investments. Evercore ISI's analysis suggests that Dell is on the brink of a multi-year revenue acceleration, driven by factors such as AI server ramps, PC refresh cycles, improvements in x86 servers, and expanded AI engagements.
Evercore ISI anticipates that Dell's revenue growth and margin expansion could lead to a re-rating of the company's valuation over time, potentially moving from the traditional 10-12 times price-to-earnings (P/E) ratio to the mid to high teens. The firm's reinforced confidence in Dell's ability to meet or exceed its fiscal year 2025 revenue growth guide of over 5% and long-term targets of 3-4% revenue growth and 8% EPS growth underpins the revised price target.
InvestingPro Insights
As Evercore ISI uplifts its outlook on Dell Technologies Inc. (NYSE:DELL), real-time data from InvestingPro aligns with some of the optimism surrounding the company. Dell's market capitalization stands robust at $94.73 billion, and the stock is trading at a P/E ratio of 29.41, which adjusts to a more appealing 25.2 when considering the last twelve months as of Q4 2024. This P/E ratio is particularly noteworthy when paired with the company's near-term earnings growth, as indicated by a PEG ratio of 0.85, suggesting potential value for investors.
InvestingPro Tips highlight Dell's high shareholder yield and significant returns over various time frames, including the last week, month, three months, and year. These performance metrics are crucial for investors considering the timing of their investments. Specifically, Dell has seen a price total return of 238.47% over the last year, and it's currently trading near its 52-week high, at 97.47% of that peak. These figures underscore the company's strong momentum in the market.
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