Michael Dell
David A. Grogan | CNBC
Dell saw a surge of 21.3% in its shares on Friday, which marked the best day since its return to the public market in 2018. This rally was driven by an earnings report that exceeded expectations, with a significant revenue beat.
The company, known for its IT hardware and infrastructure technology, reported a 13% sales decline to $22.9 billion compared to the previous year, but still surpassed the average analyst estimate of $20.9 billion according to Refinitiv. Furthermore, Dell’s adjusted earnings per share of $1.74 exceeded the average analyst estimate of $1.14.
At midday on Friday, Dell’s stock was trading at $68.59, on track for its biggest gain and highest close since its relisting on the stock market five years ago. In 2013, Dell went private with the help of founder Michael Dell and a group of private equity firms.
In addition to its impressive earnings report, Dell also raised its full-year sales forecast. The company now expects sales to range between $89.5 billion and $91.5 billion for the year, representing a 12% year-over-year drop at the midpoint. This is an improvement from their previous forecast of a 15% decline.
Despite the decline in revenue, Morgan Stanley named Dell as their top pick in the IT hardware sector, replacing Apple. According to their report, Dell is “emerging as an early Generative AI winner,” indicating its advancements in artificial intelligence.
Morgan Stanley believes Dell will benefit from the increasing demand for AI servers, as more companies allocate their spending toward this area of the hardware market. The analysts recommend buying Dell’s stock and have raised the price target to $70.
In reference to Dell’s disclosure of a $2 billion backlog of AI servers, the analysts wrote, “DELL is the first company in our coverage to directly benefit from the Gen AI spending cycle.”
Morgan Stanley maintains an overweight rating for Apple, but acknowledges the risks of increased regulation surrounding the app store.
Prior to Friday, Dell’s largest one-day gain since 2018 was a 14% increase in March 2020. Its previous record close was $60.77 in February of this year.
Correction: A headline for this story has been updated to reflect that Dell returned to the public market in 2018. A previous headline misstated the year.
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