With Dell earnings on deck, here's why BofA feels more bullish about the stock
By Emily Bary
BofA predicts sharp growth in AI revenue, as well as a bright picture into 2025
With Dell Technologies Inc. shares up 120% so far this year, that creates a high bar heading into earnings.
But BofA Global Research analyst Wamsi Mohan is feeling even more bullish, upping his price objective to $180 from $130 ahead of Thursday afternoon's report.
Mohan expects Dell (DELL) to show explosive revenue growth in artificial-intelligence servers. The company shipped $800 million in its last reported quarter, while its backlog doubled on a sequential basis to $2.9 billion. Dell's fiscal first quarter could show $1.4 billion in AI-server revenue and a backlog in the $4 billion to $5 billion range.
Mohan likes the longer-term picture as well. "We expect strong momentum into 2025 given upside from AI servers, high end storage and PC refresh with optionality from AI [personal computers]," he wrote. Plus, there's the prospect of Dell gaining entry into the S&P 500 SPX, which helped give a further boost to shares of red-hot server rival Super Micro Computer Inc. (SMCI)
Dell's stock is up 2.8% in midday trading Wednesday to $170.86.
Mohan was impressed with what he saw from the company at its Dell Technologies World corporate conference last week. Products like "new AI PCs, all-flash file storage, network architecture in addition to AI services offerings" could drive 2025 growth, he wrote.
His new price objective is based on a 18-times multiple of price to calendar 2026 earnings, whereas the old one was based on a 15-times multiple of price to calendar 2025 earnings.
"We use a higher multiple given confidence in the upside of AI demand, particularly in AI server growth," Mohan wrote. The company "remains an under-owned and underweighted stock and with the potential catalysts of AI and potential inclusion in the S&P."
-Emily Bary
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05-29-24 1229ET
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