Tuesday, Loop Capital increased its price target on Dell Technologies Inc. (NYSE:DELL) to $185 from the previous $125, while maintaining a Buy rating on the company's stock. The firm's analysts have observed significant advancements in Generative AI over the last 90 days, which they believe could continue through calendar year 2025.
In their assessment, Loop Capital highlighted two main risks to their outlook. The first is the price-to-earnings (P/E) ratio that investors are willing to pay for Dell's shares, which has seen a substantial increase from 10x to 18x. The second risk pertains to the linearity of Generative AI revenue and backlog, particularly in the July and October quarters, in light of the $1.1 billion revenue guidance for April and the $2.9 billion backlog reported in January.
The revised price target of $185 is predicated on an 18 times multiple, which aligns with the P/E ratio of the S&P 500, applied to the projected earnings per share (EPS) for calendar years 2025 to 2026, which Loop Capital estimates to be between $10.00 and $11.00. Additionally, the firm has adjusted their normalized EPS forecast for Dell upward to $11.00 from the previous estimate of $10.00.
This price target adjustment comes as the market has begun to factor in the progress of Generative AI technologies into Dell's stock value, as evidenced by the recent appreciation in the company's share price.
Loop Capital's updated valuation reflects their confidence in Dell's potential growth driven by Generative AI, while also acknowledging the challenges and uncertainties that could impact the investment thesis. The firm's analysis and projections are based on current market trends and Dell's performance indicators as they relate to the broader outlook for the fiscal year 2025.
InvestingPro Insights
Following Loop Capital's recent price target increase for Dell Technologies Inc. (NYSE:DELL), InvestingPro data shows a robust picture of Dell's performance and market stance. Dell's market capitalization stands at a solid $113.8 billion, showcasing its significant presence in the market. With a P/E ratio of 35.92, investors are currently valuing Dell's earnings quite highly, although this ratio is expected to adjust to 30.29 over the last twelve months as of Q4 2023, according to InvestingPro metrics. Additionally, Dell's strong performance is evident with a remarkable one-year price total return of 237.17%, underscoring the company's growth trajectory.
InvestingPro Tips highlight that Dell has been a prominent player in the Technology Hardware, Storage & Peripherals industry, with six analysts revising their earnings upwards for the upcoming period, indicating a positive outlook on the company's financial performance. Moreover, the stock's significant return over the last week and its trading near the 52-week high suggest a current bullish sentiment among investors. For those looking to delve deeper into Dell's prospects, InvestingPro offers additional tips, providing a comprehensive analysis of the company's financial health and market position. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for access to these valuable insights.
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