Dell to surpass expectations, as expected, by IDEAGlobal
May 10 2000 1:20PM ET
Computer-maker Dell is slated to release its fiscal first-quarter earnings on Thursday after the bell which. Given the strength of the company, Wall Street's looking for an upside surprise. Look for Dell shares to rise in the coming weeks.
IDEAglobal.com sees Dell climbing up to $55 in the next one to two weeks. Wednesday at 14:15 GMT shares are down $1-3/16 to $45-5/8.
Analysts expect Dell {DELL} to post profits of 16 cents a share, which is what the company posted last year during its first-quarter. Dell has met or surpassed analysts' expectations four out the last four quarters, so a surprise on the upside is a strong possibility. Analysts expect Dell to report revenue between $7.1bn and $7.2bn for the quarter.
For the year ending January 2000, Dell saw its revenues grow 38% to $25.3bn from the prior year while earnings increased 14% to $1.67bn in the same time frame.
Investors are not so much concerned that rising interest rates will affect demand for computers. That's not to say the Fed's attempts to cool the overheating economy won't affect Dell, its shares are just as not as sensitive as some other industries.
Not only should computer sales across the board persevere, but Dell seems to be in a stronger position than its competitors.
Dell's fiscal 2000 earnings are expected to grow 33.2% a year for the next five years, while rival computer-maker Compaq's {CPQ} are expected to increase 20% and computer-manufacturer Gateway's {GTW} are expected to rise by 24%.
Dell's operating margins are also stronger than its competitors. For every computer it sells, it makes 9% of the selling price. Compaq only makes 2.4% off every computer it sells and Gateway makes 6.9%.
So it's within reason that Dell's shares are more expensive than its rivals -- while investors think Dell is swell, the numbers support that claim. Dell trades at 55 times its expected fiscal 2000 earnings, Compaq trades at 25 times its expected year 2000 earnings and Gateway trades at 29 times its expected year 2000 earnings.
Investment-firm Robertson Stephens reiterated Dell a strong buy Monday and Investment-house Salomon Smith Barney rates Dell a buy with a 12-month price target of $71 on the shares according to its earnings preview released today.
In addition to its imminent earnings announcement, Dell is sporting a low-priced computer that has high priced Rambus-style memory. Rambus technology allows for more efficient computer memory processing. Dell expects Rambus-style memory to move into the mainstream computer market sooner though analysts believe it's likely to be later.
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