Shares of Dell Technologies (DELL) have been on the rise, and it seems that the company’s success is only going to continue. Following the latest earnings update, analysts at Evercore have identified three drivers that could further push the stock’s gains.
Dell’s shares have surged by 9.1% in premarket trading, reaching $61.38. This growth can be attributed to the impressive performance of the company, as it exceeded expectations in its latest earnings report and provided guidance that surpassed estimates.
Investors have been optimistic about Dell, leading to a 40% increase in the stock price this year, particularly due to the rising demand for personal computers. However, there are additional factors contributing to the positive outlook for Dell.
According to Amit Daryanani from Evercore, “We believe Dell has several catalysts that are gradually building up, including a forthcoming capital allocation update during their upcoming analyst day, a potential boost in revenue from AI initiatives, and the possibility of inclusion in the S&P 500 index.”
With a target price of $70 and an Outperform rating on the stock, Evercore expresses confidence in Dell’s future prospects.
In conclusion, Dell Technologies is positioned for further success as it continues to impress investors with robust financial performance and a promising future driven by various strategic factors.
Dell’s Financial Position
Dell, the renowned technology company, has closed its most recent quarter with an impressive $9.9 billion in cash and investments on its balance sheet. During an earnings call with analysts, Dell’s executives highlighted the company’s flexibility to enhance its return of capital in the future, albeit without providing explicit guidance.
Growth Potential in Artificial Intelligence
Furthermore, Dell has been actively promoting the potential advantages associated with the expansion of artificial intelligence (AI). Analysts have specifically pointed out Dell’s ability to capitalize on the growing demand for servers used in generative AI applications. In fact, AI servers accounted for a notable 20% of server order revenue during the first half of the year, according to Dell.
Upside in AI Demand
Asiya Merchant, an analyst from Citi, acknowledges the potential upside of AI-generated demand alongside positive factors such as an improving commercial PC landscape and signs of stability in server and storage demand. However, Merchant believes that AI revenue will likely only materialize in 2024 due to long lead times for orders. Nevertheless, Merchant maintains a Buy rating on Dell stock with a target price of $70.
Hope for Inclusion in S&P 500
Investors are eagerly anticipating the possibility of Dell’s inclusion in the prestigious S&P 500 index. Earlier this year, S&P Dow Jones Indices announced that companies with multiple classes of stock would now be eligible for inclusion in their key U.S. indexes. This policy change opens the door for Dell to potentially be added to the esteemed index.
