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Dell Technologies computer cables inside a supercomputer at the San Diego Supercomputer Center at the University of California San Diego.
Bing Guan/Bloomberg
Dell Technologies
will report its earnings for the July quarter after the close of trading on Thursday. And at least one analyst thinks it makes sense to buy stock in the PC and enterprise hardware company before then.
Evercore ISI analyst Amit Daryanani on Monday issued a “tactical outperform” call on Dell stock (ticker:
DELL
). His theory is that the company could report higher revenue and profit than Wall Street expects, driven by both strong demand for servers and storage and improving supplies of components in the personal-computer business. He kept his Outperform rating and $63 target price on the stock.
Near midday on Monday, Dell stock was down 1.6%, to $46.93, while the
S&P 500
was 1.7% lower. The stock is off about 16% so far this year.
Daryanani’s call is a bold one, given recent weakness in demand for personal computers. Micron Technology (MU) and Intel (INTC) both recently projected a sharp drop in unit demand for PCs for the year and slashed their forecasts for earnings.
Still, there have been a few surprising rays of light as pandemic-era supply-chain problems ease. Both
Apple
(AAPL) and
Cisco Systems
(CSCO) recently posted solid quarters, thanks in part to better-than-expected availability of components.
The question heading into the July reports for both Dell and for rival
HP Inc
.
(HPQ), which reports July quarter earnings next week, will be how the two factors play out.
Daryanani sees a potential positive surprise. He considers Dell a “defensive” play in a period of macroeconomic volatility, given that the company has gained market share across its portfolio, free cash flow is improving, and there is room for margins to increase.
Several recent data points add to Daryanani’s optimism about the quarter. He pointed out that Lenovo posted results that were in line with expectations, emphasizing that demand for commercial and premium PCs remains robust. Daryanani also said recent IDC data show Dell gaining share in the market for PCs. And he argued that the strong launch for the new mainframe cycle at
IBM
(IBM) is a “key positive” for enterprise storage. Finally, he said, Cisco’s strong quarterly results included double-digit growth in servers and security.
Dell’s guidance for the quarter called for revenue of $26.1 billion to $27 billion, up 10%, with non-GAAP profits of $1.55 to $1.70 a share. The Wall Street consensus is for $26.6 billion of revenue and a per-share profit of $1.64. For the January 2023 fiscal year, Dell’s forecast calls for growth of 6%, with non-GAAP earnings growth of 12%.
Write to Eric J. Savitz at [email protected]
