Michael Dell
David A. Grogan | CNBC
Dell, the renowned IT hardware and infrastructure technology company, witnessed a staggering 22% surge in its shares on Friday, marking its best day since the company returned to the public market in 2018. The remarkable rally was propelled by better-than-expected earnings, as Dell surpassed analyst estimates with impressive revenue figures.
Despite experiencing a 13% decline in sales, reporting $22.9 billion in revenue, Dell managed to surpass the average analyst estimate of $20.9 billion, as compiled by Refinitiv. Additionally, Dell’s adjusted earnings per share of $1.74 exceeded the average analyst estimate of $1.14.
By mid-day Friday, Dell’s shares were trading at $68.59, setting the stage for the biggest gain and highest closing price since the company’s relisting on the stock market five years ago. It is noteworthy that Dell had been taken private in 2013 by its founder, Michael Dell, and a consortium of private equity firms.
In addition to the impressive earnings results, Dell also raised its full-year sales forecast. The company now expects sales between $89.5 billion and $91.5 billion, reflecting a 12% year-over-year drop at the midpoint of the range. This forecast is an improvement from their previous projection of a 15% drop.
Despite the decline in revenue, Morgan Stanley, a leading financial institution, named Dell as its top pick in the IT hardware sector, replacing Apple. Morgan Stanley emphasized Dell’s emergence as an early winner in Generative AI, referring to the advancements in artificial intelligence. The experts at Morgan Stanley see Dell benefiting from the surging demand for AI servers, as many companies concentrate their spending in this specific area of the hardware market. The analysts recommend buying Dell’s stock and have raised the price target to $70.
Morgan Stanley noted that Dell is the first company within its coverage to directly benefit from the Gen AI spending cycle, pointing to Dell’s disclosure of a significant $2 billion backlog of AI servers. While maintaining an overweight rating for Apple, Morgan Stanley also acknowledged the potential risks associated with increased regulation around Apple’s app store.
Previously, Dell’s most significant one-day gain since 2018 was a 14% increase in March 2020, according to FactSet. The company achieved a previous record closing price of $60.77 in February of this year.
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