Dell Technologies Joins S&P 500, Stock Surges Amid Strong Performance

Analysts reacts as Dell returns to S&P 500

The computer maker was letting the world know that Chief Executive Michael Dell and the private-equity firm Silver Lake Partners had completed the acquisition of the company, which Dell had founded in 1984 when he was 19 years old. Related: Analysts revise Dell stock price target ahead of earnings This was a rough time in Dell's history. Revenue in 2012 was down 7% year-over-year and earnings were falling, prompting Michael Dell to present shareholders with a $25 billion buyout that would take the company private. "This transaction positions Dell to enter an exciting new chapter, continuing the execution of its long-term strategy and focusing on delivering best-in-class solutions to customers as a private enterprise," the company said in a statement. . "Under a new private ownership structure, Dell will be even more flexible and entrepreneurial, allowing it to do what it does best -- to serve our customers with a single-minded purpose and drive the innovations that will help them achieve their goals," Dell added. Dell CEO notes 'digital transformation' The company, which had gone public in 1988, had been a member of the S&P 500 before the transaction, which was valued at about $24.9 billion. Dell's existence as a private firm would last until Dec. 28, 2018, when the company resumed trading on the New York Stock Exchange after buying back shares that tracked the financial performance of software maker VMware. Related: Analysts reboot Dell stock price targets ahead of earnings "Our world is undergoing a digital transformation that will change every aspect of how we live, work and operate as a society," Michael Dell said in a news release. "Dell Technologies was created to be the essential infrastructure company for this digital era, and with today's announcement, we are aligning the interests of our stakeholders to benefit from the integrated innovations and value creation from across our entire family of businesses," he said. Dell, which marks its 40th anniversary this year, began a new chapter after S&P Dow Jones Indices said the company, along with Palantir (PLTR) and Erie Indemnity (ERIE) , would join the S&P 500 on Sept. 23. Dell shares are up nearly 40% year-to-date and up 50% from a year earlier. In May, Dell introduced a series of AI-enabled PCs powered by Qualcomm processors and said that a new server supporting Nvidia's (NVDA) latest chips will be available in the second half of the year. However, the shift to artificial intelligence caused disruption and on Aug. 5, an estimated 12,500 Dell employees who worked in the sales division were laid off as the company invested in a new group that will focus on AI products and services. "We are getting leaner. We're streamlining layers of management and reprioritizing where we invest," two Dell sales executives, Bill Scannell and John Byrne, said in a memo to employees. The executives also said that the company was aiming to quickly boost its growth by unlocking "the value of modern IT and AI." Analyst sees 'multiple catalysts ahead' A short time later, Dell beat Wall Street's second-quarter earnings expectations as revenue climbed 9% to $25 billion. More Tech Stocks: "We are optimistic about the coming PC refresh cycle as the installed base continues to age, Windows 10 reaches end-of-life later next year and the significant advancements in AI-enabled architectures and applications continue," Chief Operating Officer Jeffrey Clarke told analysts. While saying that "progress will not always be linear in the early stages," Clarke added that "we have the right AI portfolio with more to come, the right services capabilities, and we are optimizing our sales coverage to capture this once in a generation opportunity." "I really like our hand," he said. After the announcement of Dell's return to the S&P 500, analysts issued research reports. These include Citi's Asiya Merchant, who said Dell shares rallied after Friday's close following the announcement, according to The Fly. Dell shares can continue to work post the inclusion, given the "multiple other potential catalysts ahead," including recovery in general purpose infrastructure demand, a PC-refresh cycle ahead into 2025, artificial intelligence momentum, and capital returns, said the analyst, who affirmed a buy rating on the shares with a $160 price target. Susquehanna initiated coverage of Dell with a neutral rating and $120 price target. Dell has the scale, brand, and internal financing arm to scale AI hardware for server applications, but the investment firm sees two risk factors that have led to its below-consensus EPS estimates. They are that the economics of AI hardware remain uncertain and the strategy for scaling AI services remains unclear, Susquehanna said. The firm's fiscal 2026 and fiscal 2027 EPS estimates of $8.57 and $9.40 compare with consensus at $9.40 and $10.87, respectively. Related: Veteran fund manager sees world of pain coming for stocks

Dell ticks up following its return to S&P 500 index

"We believe DELL shares can continue to work post inclusion, given multiple other potential catalysts ahead including recovery in general purpose infrastructure demand, PC refresh cycle ahead into CY25, AI momentum and capital returns," said Citi Research analyst Asiya Merchant, in an investor note. Dell was previously included in the S&P 500 index from 1996 to 2013 when it went private. Dell became a publicly traded company again in December 2018. Citi maintains a Buy rating on Dell and a $160 price target. To qualify for the S&P 500, a company must have generated a profit in its most recent quarter and maintain cumulative profitability over the past four quarters.

Dell: Excellent Earnings - Remains A Strong Buy (NYSE:DELL)

Looking for more investing ideas like this one? Get them exclusively at The Financial Prophet. Learn More " We discussed buying Dell Technologies (NYSE:DELL) stock in early August, as its stock dropped below $90 during the late summer growth scare. While the stock has remained volatile, Dell has made a solid comeback, appreciating by approximately 35% from its recent low. Dell recently reported earnings, delivering better-than-expected results and illustrating that the AI revolution is alive and well in the hardware enterprise segment. Moreover, Super Micro Computer "SMCI" (SMCI), one of Dell's primary AI enterprise competitors, faces issues, a dynamic that may benefit Dell in the long run. Additionally, Dell was recently added to the S&P 500, a positive catalyst moving forward. Dell also has a robust sales and profitability growth momentum. Dell's consensus EPS estimate for next year is about $9.50, illustrating its forward P/E ratio is below 12, which is exceptionally cheap for a company in Dell's position. Furthermore, Dell has become accustomed to surpassing consensus forecasts and could outperform estimates as we advance. Due to its advantageous market-leading position, Dell will likely continue expanding revenues, leading to better profitability, multiple expansion, and a considerably higher stock price in the coming years. Dell's stock experienced an extensive correction. In fact, its 52% peak-to-trough decline can be considered a crash, but primarily, the steep decline accounts for the hot air that was in the stock when it went vertical around mid-year. After stabilizing, Dell's stock had a robust recovery and is now consolidating around the crucial $100-$115 range. Despite the recent volatility, Dell's valuation appears cheap here. Therefore, the downside may be limited, and the stock likely won't remain at these depressed levels for long. Dell reported EPS of $1.89, beating by 18 cents (roughly 11%). Dell's sales growth shined, as the company reported revenues of $25.03B, a $910M beat (4%), which is quite significant and impressive. Dell's Infrastructure Solutions Group provided revenue of $11.6 billion, up 38% year over year, with record servers and networking revenue of $7.7 billion (enterprise AI), up 80% YoY. Dell has also done a solid job surpassing most earnings estimates recently. For instance, Dell's TTM consensus EPS estimate was $6.18, but Dell earned $7.24 instead, a considerable 17.5% outperformance. Due to the bullish dynamic, Dell could continue outperforming, and a modest 10-15% outperformance rate implies Dell could earn around $10-40-$10.80 next year, potentially pointing to a sub-10 forward P/E multiple for Dell. SMCI, Dell's primary competitor in the AI enterprise hardware space, faces issues. A short report recently dented confidence in SMCI's stock, which was exacerbated by the company's statement that it will miss its 10K filing deadline. These events have put considerable pressure on SMCI's stock and could have broader, longer-term implications. Due to the uncertainty surrounding SMCI, Dell may gain customers as clients move away from the SMCI volatile experience to a more predictable and stable Dell atmosphere. Dell's stock could benefit as more investors pick Dell for exposure in the lucrative AI enterprise hardware space. On September 23, Dell will replace Etsy (ETSY) in the S&P 500 index. After many years of being included in the index, Dell lost its place in the S&P 500 when it went private, but it's finally regaining its spot in the coveted stock index. Being in the S&P 500 is highly favorable for Dell, as fund managers who require a stock to be in the S&P 500 will now invest in Dell. This dynamic should enable Dell's P/E ratio and other multiples to expand, leading to a higher stock price in the coming years. Dell's forward P/E ratio could expand to about 15-17 from the current depressed 10-12 ratio. Given that Dell could earn around $10 next year, a 15-17 forward P/E ratio implies that Dell should trade around the $150-$170 range. Currently, Dell is around $100 and has a roughly 50-70% upside potential to achieve its higher multiple range. Incidentally, the average 12-month price target on Wall Street is around $148, roughly 50% above Dell's current price. Also, the lowest price targets are around Dell's depressed current prices, suggesting that the downside is likely minimal now. On the upside, we see higher-end price targets going up to $220, implying the potential for a more than 100% return in the next twelve months in a bullish case outcome. Therefore, based on Wall Street's price estimates and other factors, Dell has a highly favorable risk/reward profile. Due to Dell's growth in the AI enterprise space, a likely constructive cycle in its computer business, and other favorable factors, we could see solid sales growth in future years. Additionally, Dell's AI segment continues to improve its general profitability. Dell will also likely benefit from future efficiency increases. Therefore, Dell could go through a period of considerable EPS growth. This dynamic could lead to multiple expansion, as Dell's forward P/E ratio could grow into the 15-17 range or higher, resulting in a substantially higher stock price in future years. Dell faces risks due to macroeconomic factors, competition, and other elements. A slower-than-anticipated economy could harm Dell's legacy computer business and AI segment. Worsening growth in the AI space could impact Dell's stock very negatively. Moreover, Dell faces competition from SMCI and other competitors in the enterprise AI space. The higher interest rates for longer policy can also hurt sales and cause growth to decrease. Investors should examine these and other risks before investing in Dell.

Monday's analyst calls: Dell to rally more than 55%, consumer stock gets downgraded

(This is CNBC Pro's live coverage of Monday's analyst calls and Wall Street chatter. Please refresh every 20-30 minutes to view the latest posts.) A tech giant and a consumer goods name were among the companies being talked about by analysts on Monday. Citi reiterated Dell Technologies as a buy, noting the stock could see strong gains after its upcoming inclusion into the S & P 500 index. Meanwhile, Morgan Stanley downgraded Church & Dwight to equal weight from overweight. Check out the latest calls and chatter below. All times ET. 5:51 a.m.: Morgan Stanley downgrades Church & Dwight After Church & Dwight's runup, Morgan Stanley sees its bullish thesis having played out. Analyst Dara Mohsenian downgraded the consumer packaged goods stock to equal weight from overweight. Mohsenian's $110 price target implies just 4.6% upside over Friday's closing level. The analyst said the stock was fairly valued after ripping nearly 30% higher since the start of 2023. That makes it one of the best performers within the coverage area over that time period, Mohsenian said. Still, shares are up less than 12% in 2024, underperforming the S & P 500. CHD YTD mountain CHD year to date Mohsenian also said the overweight thesis that earned the stock an upgrade early last year is now basically worked through. On top of that, he noted a tough pricing environment for household and personal care stocks that can weigh on the Arm & Hammer parent. Looking ahead, he said there's stronger plays within the sector. "From a company perspective, we are very forthright that there are no home runs in our coverage here from our vantage point," he said. "We remain most bullish on OW rated Coca-Cola and Colgate as our top picks longer-term and see short-term upside at EW rated Clorox and Keurig Dr Pepper, despite our longer-term EW stances." -- Alex Harring 5:51 a.m.: Dell to rally on S & P 500 inclusion, Citi says Get ready for big gains in Dell Technologies shares, according to Citi. Analyst Asiya Merchant reiterated her buy rating and $160 price target on the stock -- which implies upside of 57% from Friday's close. Shares popped more than 6% in the premarket after S & P Dow Jones Indices announced late Friday that the laptop maker would rejoin the S & P 500 benchmark on Sept. 23. "Dell was a member of the S & P 500 from 1996 to 2013, before going private. In prior research we have identified the S & P 500 index inclusion as a potential catalyst," Merchant wrote. "We believe DELL shares can continue to work post inclusion, given multiple other potential catalysts ahead including recovery in general purpose infrastructure demand, PC refresh cycle ahead into CY25, AI momentum and capital returns." Year to date, shares have climbed more than 33%. DELL YTD mountain DELL year to date -- Fred Imbert