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On Friday, Morgan Stanley (NYSE:MS) adjusted its outlook on Dell Technologies Inc (NYSE:DELL), increasing the price target from $126.00 to $135.00 while maintaining an Overweight rating on the company’s shares. The decision follows a thorough analysis of Dell’s financial performance and market position, particularly regarding its artificial intelligence (AI) server segment. With analyst targets ranging from $91 to $150 and a strong consensus recommendation, Dell currently trades at a P/E ratio of 17.4x. InvestingPro analysis suggests the stock is currently trading near its Fair Value, with 5 analysts recently revising their earnings estimates upward.
Erik Woodring, an analyst at Morgan Stanley, highlighted that the strength in AI server sales is anticipated to balance out some minor concerns in the enterprise sector. Despite slight adjustments to the estimates, the firm’s long-term projections for Dell’s financial year 2026 remain largely unchanged after the company’s recent earnings report. Woodring notes that Dell’s implied guidance for the second half of the year seems conservative, and as a result, Morgan Stanley’s estimate now stands at 15 cents above the midpoint of management’s $9.40 earnings per share (EPS) guidance. This aligns with InvestingPro’s FY2026 EPS forecast of $9.48, supported by the company’s solid revenue growth of 8.1% and its position as a prominent player in the Technology Hardware industry.
The analysis also points out that Dell’s performance is robust, with the company gaining market share in traditional enterprise markets and managing costs effectively. This has resulted in revenue and EPS growth that outpaces the company’s long-term model. However, Woodring mentions that the high-margin AI attach opportunity for Dell, which refers to additional AI-related services and products sold alongside servers, appears to be somewhat distant. This limits the potential for multiple expansion in the company’s valuation, suggesting that future stock performance may rely more on positive revisions to earnings estimates rather than an increase in the price-to-earnings (P/E) ratio.
Morgan Stanley remains Overweight on Dell’s stock due to the potential for upward revisions to EPS, particularly in the second half of the year, as demand for AI servers could surpass guidance and storage margin strength continues. Nevertheless, for an even more optimistic view on Dell, evidence of a clear emergence of AI attach sales would be necessary, which the firm believes will take more time to unfold.
In other recent news, Dell Technologies Inc. reported its first-quarter earnings for 2025, emphasizing significant growth in its AI server business. The company posted a revenue of $23.38 billion, surpassing the forecasted $23.14 billion, although its earnings per share (EPS) of $1.55 fell short of the expected $1.69. This revenue growth was largely driven by a notable increase in AI server orders, which exceeded $12 billion. Despite the EPS miss, Dell raised its full-year EPS guidance to $9.40, reflecting a 15% increase. Additionally, Dell returned $2.4 billion to shareholders through buybacks and dividends.
The company’s strategic partnerships with NVIDIA (NASDAQ:NVDA) and Google (NASDAQ:GOOGL) have bolstered its position in the AI market. Dell’s Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG) both experienced growth, with ISG revenue up 12% and CSG revenue rising by 5%. Analysts at Evercore ISI, Melius Research, and Morgan Stanley highlighted the strong demand for Dell’s AI servers and expressed optimism about the company’s future prospects. Dell’s focus on AI technology and its robust financial performance indicate a promising outlook for the rest of the fiscal year.
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