By Senad Karaahmetovic
Dell Technologies (NYSE:DELL) shares are down about 1.5% in pre-market Tuesday after the company issued soft guidance for its fourth quarter.
For the third quarter, Dell reported results that topped Wall Street estimates. The IT company reported adjusted EPS of $2.30 on revenue of $24.7 billion, better than the consensus for $1.61 per share and $24.4B, respectively.
"We combatted slower demand and drove record profitability, with record operating income of $1.8 billion," the company stated.
For this quarter, Dell said it expects to record revenue of $24B, signaling a quarter-over-quarter decline. Moreover, it implies a 16% year-over-year decline, led by a sharp decline in Commercial PCs and further server softening. Analysts were expecting $24.9B in Q4 revenue.
The adjusted EPS is seen at $1.65 (the midpoint), beating the $1.61 consensus.
Citi analysts cut the price target on Dell stock to $53 per share from $55 to reflect a “conservative guide.” However, they say the weaker-than-expected revenue guidance for the fourth quarter could open the door for a beat, in case of a soft economic recession.
“We recognize investors may be confused with all the complex moving parts to the Dell model and as we approach calendar 2023 (Dell’s fiscal 2024) we believe the commentary on the conference will likely move consensus sales lower from $99b to closer to $91b,” the analysts added.
Raymond James analysts raised the price target to $50 from $47 while maintaining an Outperform rating.
“We envision stickiness to the margin improvement aided by mix, reduced memory costs, and lower shipping expenses; however, reduced volume and the potential for discounting present possible headwinds,” they said.