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shares are getting a lift Wednesday from Deutsche Bank analyst Sidney Ho, who reiterated his Buy rating on the PC and storage hardware company while upping his price target on the stock to $100, from $94.
Ho notes that with a year-to-date gain of 22% through Tuesday’s close,
shares (ticker: DELL) have outperformed both the broader market (the
is up about 6%) and most other hardware stocks. But he sees further gains ahead as IT spending picks up later in the year.
Ho writes that Dell’s full-year guidance for revenue growth—up 3% to 5%—could prove too conservative, “as Dell should see a nice uptick in enterprise-driven businesses in the calendar second half, while its relatively low exposure to consumer-driven businesses should help limit the downside should work-from-home benefits reverse.”
In an interview with Barron’s in February, Dell Chief Financial Officer
Tom Sweet
said that the company is seeing some positive signs of improving demand. “It’s early innings, but we’re seeing some positive signs,” he said. “IT spending is expected to increase this year. CSG [the company’s PC business] will have another good year, with more strength in the front half of the year.” Sweet said the company expects enterprise spending to pick up in the second half of the year, although he notes that the timing is uncertain.
Ho also notes that there is an important potential catalyst ahead, with the pending decision on a potential spinoff of the company’s majority stake in VMware later this year.
“With increasing optimism for IT spending to recover and our view that core Dell should be valued similar to its peers’ shares, we raise our price target,” he writes. “Our new price target, however, does not assume any equity value unlocked through a VMware spin-off, which could be a positive catalyst for the stock later in 2021.”
Dell shares are up 3.1%, at $92.28, in recent trading. The S&P 500 is up 0.2%.
Write to Eric J. Savitz at eric.savitz@barrons.com
