Earlier in the week researchers were tipping growth for the PC industry, and if you owned Dell shares a few weeks ago and still have them today you should be 90% better off with expectations of growth from AI seriously boosting their value.
Some Dell Technologies investors are questioning whether the stock’s recent price tag justifies the surge in the stock because none of the growth from AI has materialized yet.
The personal computer maker’s shares soared nearly 90% to a record through the end of November, with the stock trading above its five-year average at about 10 times forward earnings.
Hendi Susanto, an analyst at Gabelli Funds told Bloomberg “The stock had run up significantly and we are taking a patient approach when it comes to the AI growth opportunity.”
Dell got a big bounce along back in August when unlike a lot of their competitors, they beat sales expectations in the second quarter with the growth coming from servers and not consumer PC’s.
It’s a scenario analyst like Morningstar’s William Kerwin have been warning of.
The stock has picked up three-sell equivalent ratings since August. Kerwin, who cut his rating on Dell to sell in September, says shares are overvalued at current levels.
Daniel Newman, chief executive officer of The Futurum Group. “Growth in this area will require a cycle when people are upgrading because AI enables them to do something new on the device,” said “Everyone seems convinced that the bottom of the PC cycle is here, and there are some positives in that, but the real growth won’t come until AI-based PCs and phones come out.”
Consensus estimates that Dell’s revenue in the fiscal first quarter of 2025 will slip to about $21 billion before rebounding to nearly $23 billion in the second quarter and growing through the end of the year.
Still, Wall Street remains bullish on Dell overall.
More than 70% of those covering the company have a buy-equivalent rating, and the average $79 price target implies more than 13% upside, according to data compiled by Bloomberg.
