On Friday, UBS updated its outlook on Dell Technologies Inc (NYSE:DELL) shares, increasing the price target to $141 from $113, while maintaining a Buy rating. The adjustment reflects an anticipated uptick in the company's Infrastructure Solutions Group (ISG) revenue, driven by expanding demand for AI servers.
The firm anticipates that shorter GPU lead times, which have decreased from 40 weeks late last year to the current 8-10 weeks, along with a diversification of AI server demand beyond hyperscalers to include Tier 2 Cloud and Enterprise customers, will contribute to a revenue increase.
Estimates for Dell's ISG revenue in fiscal year 2025 (FY25) have been raised by approximately 4%, with forecasts for fiscal year 2026 (FY26) seeing a more significant 10% upward revision.
UBS's forecast is underpinned by the expectation that the global market for AI-related servers will surge by 48% in calendar year 2024 (CY24) and by 21% in calendar year 2025 (CY25). This growth is seen as a positive influence on Dell's server business, despite a sluggish demand in the legacy enterprise sector.
However, UBS has slightly lowered its revenue forecast for Dell's Client Solutions Group (CSG) for FY25 by 3.4%, citing a slower recovery in the PC market than previously expected. This assessment is based on information from notebook Original Design Manufacturers (ODMs) in Asia-Pacific and statements from Taiwan Semiconductor Manufacturing Company (TSMC).
Despite this adjustment, the overall financial outlook for Dell is positive, with UBS projecting FY25 revenue to be marginally higher by 30 basis points at $93.4 billion—slightly below the consensus of $93.6 billion. For FY26, the revenue forecast has been increased by 2.3% to $98.3 billion, which represents a 5.3% growth, although this is still below the consensus forecast of $99.7 billion.
InvestingPro Insights
As UBS revises its price target for Dell Technologies Inc (NYSE:DELL), real-time data from InvestingPro provides additional context for investors. With a Market Cap of $84.49B and a P/E Ratio that stands at 26.41, Dell is recognized as a prominent player in the Technology Hardware, Storage & Peripherals industry. The company's adjusted P/E Ratio for the last twelve months as of Q4 2024 is even more attractive at 22.48, highlighting its potential relative to near-term earnings growth.
InvestingPro Tips indicate that Dell has a high shareholder yield and is currently trading at a low P/E ratio relative to its earnings growth. These factors, combined with the company's significant price uptick over the last six months, with a 6 Month Price Total Return of 78.38%, underscore the company's strong market performance. Additionally, analysts predict that Dell will be profitable this year, which is corroborated by a robust 1 Year Price Total Return of 177.08% as of the date provided.
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