DELL continues to receive rave revues from wall Street as the direct marketer of PCs is expected to gain market share while rivals stumble. Or at least this is the view being expressed by analysts Ashok Kumar and Paul Mansky at Piper Jaffray as they initiated coverage of Dell with a "strong buy," while giving Gateway 2000 (GTW 46 13/16 +1/8) and Compaq Computer (CPQ 25 15/16 +3/16) a "neutral" rating. In their view, Dell is expected to pick-up market share from Compaq as the latter struggles with inventory woes that inhibit a smooth transition to the upcoming 100 MHz platform for server/workstations. At the same time, Dell's direct model continues to generate
rocket-like growth, which is allowing the company to differentiate itself from its competitors,
despite the industry move towards lower margin units. In fact, according to Piper Jaffray, Dell's
revenue and earnings path is expected to be sustained by the "shift in product mix to
servers/workstations" which are projected to make gross margins more stable given the move
towards lower priced PCs. This trend is expected to hold up even as Dell announces price
reductions in its PowerEdge servers and OptiPlex desktop models due to its lower cost business
model and component pricing. Accordingly, Messrs. Kumar and Mansky have set a $100
12-month price target on the stock as the company is expected to capitalize on the Windows
NT upgrade cycle, particularly in Europe, offsetting the weakness noted in the Asian/Pacific rim.
In their view, Dell is still the company to beat. From Briefing.com |
