Dell has been around for more than 30 years and, in the past, focused mainly on manufacturing computers and other hardware, but recent acquisitions have broadened its offerings to include software, cloud-based services, data protection and more.
Given the uncertain economic climate, concerns loom over whether Dell can thrive? Will it prosper, and if so could it pop by as much as 43.4%?
Dell’s recent stock performance and trajectory
After going public again in 2018, Dell’s stock saw a slow and gradual increase in its first three years. However, in 2021 Dell’s share price displayed more promising signs of upside as it broke out of a trading range and rose to new highs, nearly doubling its stock price.
This breakout was mainly driven by pandemic tailwinds and the demand for remote working solutions. During this year, Dell produced a record $94.2 billion in revenue, which was 2% higher than its previous year’s revenues.
However, as the pandemic began to subside in 2022, demand for Dell’s products and services started to slow down. Workers returned to offices, and many companies focused on cost savings, which triggered a decrease in spending on Dell’s products. This was reflected in the company’s recent third-quarter results, with revenue decreasing by 6% to $24.7 billion compared to the same quarter last year.
In spite of this decline, there are still some promising signs that could indicate an upside opportunity. Dell’s P/E ratio is currently 6.4, which is lower than the industry average of 15, suggesting there is still room for Dell to grow. Furthermore, operating income due to cost-cutting measures has soared by 68% in the third quarter to a record $1.8 billion.
Upsides For Dell
Strategy for Growth
Despite the tech sector’s slump after an incredible year in 2021, management is confident of a rebound.
Dell is targeting under-serviced markets such as India and other emerging countries. For example, business in India alone increased by 64% year-over-year. These markets have tremendous growth potential due to their technology gap with developed nations, and Dell aims to capitalize on this by providing the necessary hardware and services that these countries need to bridge the divide.
Dell is also developing new products tailored to specific customer needs. These include specialized solutions for large enterprises and small businesses with unique requirements in data storage or cloud-based services. With new offerings like PowerMax Storage, Dell is well-positioned to deliver tailored solutions that will better meet the needs of specific customers.
Diversified Business Portfolio
In addition to its enterprise solutions portfolio, Dell is diversifying into other related businesses such as software, artificial intelligence, and 5G technology.
Though the company is often synonymous with computers and hardware, it is now investing in these other areas to become a full-service technology provider.
In fact, total operating income of $1.4 billion for Dell’s infrastructure segment surpassed their $1.1 billion for the PC segment for the first time in Q3. This is a sign that Dell is successfully transitioning to a more software and service-focused company.
The Market Share Advantage
One of Dell’s primary advantages over its competitors is its strong market share position.
Dell currently holds around 17.7% of the global personal PC market, which makes it the third-largest player after HP and Lenovo.
This market share gives Dell a competitive edge over its rivals, allowing them to leverage its brand name and customer loyalty to increase sales.
Strong focus on digital transformation
Finally, Dell recognizes the importance of digital transformation and has taken steps to address this need.
Delivering Zero Trust Security solutions and capabilities, Dell is positioning itself to help customers protect their data through its sophisticated security offerings.
In addition, sectors like edge, data management, AI and machine learning represent an addressable market of roughly $650 billion. With Dell’s expertise in these areas, the company should be able to take advantage of this immense market opportunity.
The risks associated with investing in Dell
As with any investment, there are risks associated with investing in Dell, including:
• Market share erosion from competitors
• Dependence on enterprise customers, which are subject to changing demand in the technology sector.
• Fluctuations in global economic conditions can make growth unpredictable.
• Reliance on suppliers could be affected by supply chain disruptions or supplier price increases.
Will Dell Go Up 43.4%?
Dell presents a great long-term investment opportunity for those looking to benefit from its diversified portfolio and strong market share position.
As the world moves increasingly towards digital transformation and adopting new technologies, Dell has positioned itself well to benefit from these changes.
So can the company rise by 43.4%? According a discounted cash flow forecast, it can and we peg fair value at $63.85 per share.