On Tuesday, Barclays adjusted its stance on Dell Technologies Inc (NYSE:) stock, upgrading the company from Underweight to Equalweight, while setting a price target of $97.00.
The firm recognized the company’s valuation at approximately 11 times the projected earnings per share (EPS) for calendar year 2025, which is notably higher than the historical average and above the multiples of peers such as HP Enterprise and HP Inc (NYSE:), which trade around 9 times their projected earnings.
The rationale behind the upgrade is linked to Dell’s burgeoning artificial intelligence (AI) business, which Barclays believes justifies the higher multiple. The AI segment is expected to drive the company’s revenue growth and maintain its strength throughout the year.
Despite this positive outlook for the AI business, Barclays anticipates challenges in the personal computer (PC) and traditional server/storage markets due to the current weak macroeconomic environment.
Barclays notes that the AI business alone may not be sufficient to counterbalance the pressures faced in other segments of Dell’s operations.
However, the firm has moved to an Equalweight rating as its previous Underweight thesis has been realized and the company’s trading multiple has realigned closer to its historical levels.
The price target of $97.00 reflects Barclays’ assessment of Dell’s market position and future prospects, taking into account the company’s financial performance and industry conditions.
InvestingPro Insights
Recent insights from InvestingPro provide a deeper look into Dell Technologies Inc’s (NYSE:DELL) financial health and market performance. With a market capitalization of $67.39 billion and a P/E ratio that stands at 19.03, Dell’s valuation seems to be in line with Barclays’ analysis. Moreover, the company’s aggressive share buyback strategy and high shareholder yield are notable highlights that complement the Barclays upgrade. Dell’s P/E ratio is lower than the industry average when considering near-term earnings growth, which may signal an attractive investment opportunity.
InvestingPro data also shows a strong free cash flow yield, indicating the company’s ability to generate cash and potentially return value to shareholders. This aligns with the Barclays’ positive view on Dell’s AI business driving revenue growth. However, it’s worth noting that Dell’s short-term obligations exceed its liquid assets, which may warrant caution for risk-averse investors. For those interested in exploring further, InvestingPro offers additional insights on Dell Technologies, with 12 more InvestingPro Tips available, providing a comprehensive understanding of the company’s financial performance and market position.
Overall, the InvestingPro data supports Barclays’ upgraded stance on Dell, highlighting the company’s potential in a competitive technology landscape while also pointing out areas that may require investor attention.
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