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On Friday, UBS analyst David Vogt revised the price target for Dell Technologies Inc. (NYSE:DELL) to $145, down from $145, while maintaining a Buy rating on the company’s shares. With a current market capitalization of $78.28 billion, Dell is a prominent player in the Technology Hardware industry. The adjustment follows Dell’s first-quarter performance, which fell short of AI server revenue and consolidated gross margin expectations, with margins at 22.22%. This was attributed to challenges in the Client Solutions Group (CSG) and a dip in server demand in North America. According to InvestingPro analysis, the stock is currently trading at attractive valuations relative to its growth potential, with a PEG ratio of 0.44.
Despite the quarterly shortfall, Dell reported a substantial $12 billion in AI orders during the quarter, boosting its backlog to $14.4 billion. This impressive order intake exceeded anticipations, especially considering Dell’s February announcement of securing nearly $5 billion in orders from xAI. The demand outstripped even the most optimistic supply chain forecasts. With trailing twelve-month revenue of $96.7 billion and revenue growth of 7.75%, Dell continues to demonstrate strong market presence.
Vogt acknowledged that while the market might be concerned with the unpredictability of order timing and revenue recognition volatility, he suggested focusing on Dell’s target of exceeding $15 billion in AI revenue by fiscal year 2026. Dell’s AI server revenue in the first quarter was reported at $1.8 billion, the lowest since the $1.7 billion recorded in April 2024. However, the company has projected approximately $7 billion in AI server revenue for the second quarter.
The analyst noted that the second half of fiscal year 2026 is expected to see revenues of around $6.5 billion, a slight increase from $6 billion in the latter half of fiscal year 2025. Despite these projections, the lower margin rate attached to AI servers might limit the valuation multiples for Dell’s stock. Vogt emphasized that the gross profit dollars from AI servers are accretive, yet the below-corporate rate could cap the stock’s valuation.
In conclusion, Vogt pointed out that Dell’s stock is trading at less than 12 times the firm’s estimated free cash flow (FCF) for calendar year 2026, which is $9.64 per share. Currently trading at a P/E ratio of 17.49x, with analyst targets ranging from $91 to $155, he believes that the current share price presents a favorable risk/reward scenario, especially considering the resilience of Dell’s supply chain amid challenging economic conditions. For deeper insights into Dell’s valuation and growth prospects, including 13 additional key ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, Dell Technologies Inc. has reported a mixed financial outlook for its fiscal year 2026. The company faced a shortfall in its first-quarter earnings per share (EPS) and earnings before interest and taxes (EBIT), leading to a downward revision of its EBIT forecast to a range of $9.1-$9.5 billion. Despite these challenges, Dell reported a record $12.1 billion in AI server orders, with expectations of converting approximately $7 billion to revenue in the second quarter. Analysts from Goldman Sachs and JPMorgan maintained a positive outlook, with Goldman Sachs reiterating a Buy rating and a $130 price target, while JPMorgan raised its target to $125, citing strong AI demand.
Raymond (NSE:RYMD) James also increased its price target to $150, noting Dell’s impressive AI server revenue guidance for the second quarter. BofA Securities went further, raising its price target to $155 and highlighting the potential for over $30 billion in AI server revenues over the next two years. Despite a cautious overall outlook due to softer traditional enterprise demand, Dell’s management remains optimistic about AI server deployments. The company executed a significant share buyback program, purchasing 22.1 million shares, which supported a slight increase in its EPS guidance for fiscal 2026. Aletheia Capital reiterated a Buy rating with a $150 target, reflecting confidence in Dell’s market potential and ongoing adaptability.
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