2024-06-03 17:04:26 ET
Summary
- Dell Technologies reported mixed results with strength in AI server revenue and servers shipped, but flat growth in storage and decline in consumer PC sales.
- The company is well-positioned for a strengthened end of FY25 and continued strength in FY26 as enterprise customers transition to bringing AI models into production.
- I anticipate that storage, networking equipment, and endpoints will realize significant growth as AI/ML models are brought into production.
Dell Technologies ( DELL ) reported a relatively mixed Q1’25 with significant strength in AI server revenue, servers shipped, and strength in their growing backlog. Despite this elevated level of demand, other segments remained challenged as storage reported a flat quarter with 3% growth in commercial PC sales paired with a -15% decline in consumer PC and a narrower forecast to operating margins. Though these factors appear disheartening upfront, I believe Dell is well-positioned for a strengthened end of FY25 and continued strength going into FY26 as enterprise customers transition from training AI/LLM models to bringing them into production, which I believe will create a cascading effect across storage, networking, and ultimately, endpoint sales. With this thesis baked into my financial forecast, I reiterate my STRONG BUY recommendation for DELL shares and believe shares should be priced at $194.41/share at 8.48x FY26 EV/EBITDA....
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Dell's Selloff Opens The Door For A Buying Opportunity