| | Dell Down 3% Despite A 30% Rise In First-Quarter Earnings
DOW JONES NEWSWIRES
By Donna Fuscaldo
Of DOW JONES NEWSWIRES
NEW YORK -- Despite posting a 30% rise in earnings and an 18% increase in sales for its fiscal first quarter, shares of computer maker Dell Computer Corp. (DELL) edged lower in trading earlier Friday.
Although Dell is one of the only PC companies to actually see growth as it steals share away from rivals, investors sold off the stock as analysts questioned its valuation, with at least one industry watcher downgrading his rating on the stock because of its price.
Richard Gardner, an analyst at Smith Barney who early Friday lowered his investment rating on shares of Dell to inline from outperform, said he considers the stock rich and that he sees limited upside in the next 12 months.
While Gardner, who doesn't own shares of Dell, said the company is a "core technology holding" for investors, he said any positives are already baked into the stock.
"Unfortunately we believe Dell's superior growth and return potential are fully discounted in the current share price," said Gardner who has $32 price target on shares of Dell.
Recently the stock was trading at $31.58, down 2%, or 61 cents, on volume of 8.6 million shares. Average daily volume is 22.4 million shares. The stock is more than 40% off its low of $21.90 set last July.
Late Thursday the Round Rock, Texas, computer maker reported net income of $598 million, or 23 cents a share, compared with $457 million, or 17 cents a share, a year earlier. The company's PC shipments jumped 29%, the highest rate in more than two years.
Sales rose 18% to $9.53 billion from $8.07 billion a year earlier. Analysts, according to Thomson First Call had expected Dell to weigh in with earnings of 23 cents on sales of $9.52 billion.
Looking out to the second quarter Dell forecasted earnings of 24 cents and sales of $9.7 billion, in line with Wall Street's consensus, according to First Call.
Laura Conigliaro, an analyst at Goldman Sachs said Dell's stock was likely to take a breather despite the "obvious strengths that underlie Dell's premium valuation." Given that Dell's stock has broken through the top of its two-year trading range of $23 to $29, she said a more attractive entry point for shares of Dell would be in the mid $20s. Conigliaro doesn't own shares of Dell.
Smith Barney doesn't have an investment banking relationship with Dell and Goldman Sachs hopes to seek one.
Officials at Dell weren't immediately available for comment.
By Donna Fuscaldo; Dow Jones Newswires; 201-938-5253
donna.fuscaldo@dowjones.com
Updated May 16, 2003 9:34 a.m. |
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