Dell Technologies: Barclays Raises PT to $131 from $123, Maintains Equal-Weight Rating

Dell Technologies: Barclays Raises PT to $131 from $123, Maintains Equal-Weight Rating

In a significant development, Barclays has revised its price target for Dell Technologies (DELL.US) upward to $131, from the previous $123, while maintaining an equal-weight rating. This move follows the company's strong second-quarter financial performance, which exceeded market expectations in several key metrics.

Second-Quarter Highlights

Dell Technologies reported record revenue of $29.8 billion for the second quarter, up 19% year-over-year, surpassing analyst expectations of $29.2 billion [1]. The company's earnings per share (EPS) reached $1.70, a 38% increase year-over-year, exceeding the consensus estimate of $2.30 [1]. The Infrastructure Solutions Group (ISG) revenue grew by 44%, reaching $16.8 billion, while the Client Solutions Group (CSG) revenue increased by 1% to $12.5 billion [1].

Third-Quarter Guidance and Stock Performance

Despite the strong second-quarter results, Dell Technologies' stock price fell by more than 5% in after-hours trading on Thursday, driven by the third-quarter earnings per share (EPS) guidance falling short of analyst expectations, a significant quarter-on-quarter decline in AI server orders, and infrastructure gross margins below expectations [1]. The company expects third-quarter revenue to be between $26.5 billion and $27.5 billion, with EPS guidance of $2.07 [1].

Market Outlook

Barclays' analyst, Joryn, noted that while the second-quarter results were strong, the third-quarter guidance and the ongoing challenges in the PC business have led to a cautious outlook. The company's reliance on high-priced processors and the potential impact of the cessation of Windows 10 support in October remain key factors influencing market sentiment [1].

Future Growth

Dell Technologies has forecasted annual AI server shipments reaching $20 billion, doubling year-over-year, and expects total AI server shipments for the fiscal year to reach $20 billion [1]. The company continues to expand into enterprise and sovereign-level markets, with a growing sales pipeline for AI servers [1].

Conclusion

The revised price target by Barclays reflects a balanced view of Dell Technologies' performance. While the company's second-quarter results were impressive, the market remains cautious due to the third-quarter guidance and the ongoing challenges in the PC business. Investors should closely monitor Dell's future quarters and the impact of external factors such as Windows 10 support cessation on its financial performance.

References

[1] https://news.futunn.com/en/post/61346716/dell-technologies-revenue-and-profits-exceeded-expectations-but-ai-server
[2] https://www.ainvest.com/news/dell-technologies-q2-earnings-revenue-19-eps-2-32-key-metrics-outlined-2508/