Dell risk-reward attractive, stock is cheap, Bernstein says
Oct. 06, 2023 9:56 AM ET
By: Christiana Sciaudone, SA News Editor
 Thinglass/iStock Editorial via Getty Images
The risk-reward on Dell (Dell) is still attractive, according to Bernstein.
The PC-maker presented an “incrementally” positive view of the infrastructure solutions group during its investor meeting on Thursday, analysts led by Toni Sacconaghi, Jr., wrote in a note.
The firm, which has an Outperform on the stock with an $80 price target, called Dell “a best-in-class operator with a relatively inexpensive valuation at ~10x P/E and strong [free cash flow] conversion.”
Potential catalysts also include index inclusion and rising earnings estimates, while risks include uncertainty around artificial intelligence profitability and the potential for more muted PC margins over the next couple of years.
Dell (NYSE: DELL) is benefiting from the AI boom and is seeing “significant strength in AI-enabled servers” the company's management said in an August 31 earnings call.
Workstation demand is higher because of the rise of AI developers, as is demand for AI solutions, executives said on the call. Generative AI “represents an inflection point driving fundamental change in the pace of innovation while improving the customer expectation and enabling significant productivity gains and new ways to work.”
Bernstein said the near-term AI opportunity seems huge for Dell, but conversations with executives “reinforce our concerns about a capacity overbuild and profitability.”
Dell's AI backlog appears to be growing, the firm noted.
For its PC business, Dell forecast 2% to 3% growth and 3% to 4% revenue growth overall, unchanged from its previous outlook.
The firm noted that Michael Dell stated that he had no desire or intention to take Dell private again. The company also appears to be anticipating inclusion in the S&P 500, analysts said.
DELL is up nearly 62% year-to-date.
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